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8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 191
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 291
1 THE ROLE AND FUNCTION
OF OBJECTIVES
The role and function of objectives
bull What are objectives
bull A hierarchy of objectives
18032014 JT -84 slides 2
bull Business goals and objectivesbull Setting objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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The role and function of
objectives
a They enable the overall objectives of theorganisation to be broken down into clearstatements of what needs to be done at eachlevel
18032014 JT -84 slides 3
ey prov e c ear s a emen s o w a ac onneeds to be taken
c They provide a focus for all activity
d They provide targets for both individual and
group achievemente They facilitate the control of actual performance
f They provide a basis for evaluating howsuccessfully the plans are being implemented
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A hierarchy of objectives
18032014 JT -84 slides 4
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Different categories of objectivesbull Strategic objectives such as the mission
and corporate objectives affect thewhole organisation and are normally long-
term
bull Functional objectives relate to a
18032014 JT -84 slides 5
most team objectives as well These aretypically medium-term
bull Individual objectives relate to particularpeople and to their work Most of thesebut by no means all will involve short-term activities
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Business goals and objectives
18032014 JT -84 slides 6
8122019 BtecBS Part a- Strategic Fomulation (1)
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Types of objectivesbull Primary amp secondary objectives
ndash Some objectives are moreimportant than others
bull Long-term objectives and short-term objectives
bull Financial objectives wouldinclude the followin
bull Corporate objectives and unit objectives ndash Corporate objectives These objectives
should relate to the key factors for businesssuccess
- Profitability - Customer satisfaction- Market share - Quality of the firmrsquos products- Growth - Human resourcesCash flow
18032014 JT -84 slides 7
ndash Profitability ndash Return on investment (ROI) orreturn on capital employed(ROCE)
ndash Share price earnings per sharedividends
ndash Growth
bull Multiple objectives ndash A firm might identify several
objectives growth Maintainingpolicies acceptable level ofborrowing
bull ec no og ca goa s ndash Technological goals might be stated as
followsbull product design and production
methods using current and newtechnology
bull improve current products through R amp Dbull level of quality
bull Product-market goals ndash Market leadership
ndash Coverage ndash Positioning
ndash Expansion
8122019 BtecBS Part a- Strategic Fomulation (1)
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Definitions amp Setting Standards
process and SMARTbull Standards are the agreed quality measures that are used to
judge whether a task has been satisfactorily completed
bull Performance criteria are the individual standards of performancethat help to judge that work is being done satisfactorily
18032014 JT -84 slides 8
bull Process1 Agree the objectives2 Prioritise the objectives3 Define the activities and tasks4 Agree standards of performance
5 Allocate roles6 Set and timetable performance criteria
bull SMART Specific Measurable Agreed Realistic Timetabled
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
8122019 BtecBS Part a- Strategic Fomulation (1)
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
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The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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1 THE ROLE AND FUNCTION
OF OBJECTIVES
The role and function of objectives
bull What are objectives
bull A hierarchy of objectives
18032014 JT -84 slides 2
bull Business goals and objectivesbull Setting objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 391
The role and function of
objectives
a They enable the overall objectives of theorganisation to be broken down into clearstatements of what needs to be done at eachlevel
18032014 JT -84 slides 3
ey prov e c ear s a emen s o w a ac onneeds to be taken
c They provide a focus for all activity
d They provide targets for both individual and
group achievemente They facilitate the control of actual performance
f They provide a basis for evaluating howsuccessfully the plans are being implemented
8122019 BtecBS Part a- Strategic Fomulation (1)
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A hierarchy of objectives
18032014 JT -84 slides 4
8122019 BtecBS Part a- Strategic Fomulation (1)
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Different categories of objectivesbull Strategic objectives such as the mission
and corporate objectives affect thewhole organisation and are normally long-
term
bull Functional objectives relate to a
18032014 JT -84 slides 5
most team objectives as well These aretypically medium-term
bull Individual objectives relate to particularpeople and to their work Most of thesebut by no means all will involve short-term activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Business goals and objectives
18032014 JT -84 slides 6
8122019 BtecBS Part a- Strategic Fomulation (1)
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Types of objectivesbull Primary amp secondary objectives
ndash Some objectives are moreimportant than others
bull Long-term objectives and short-term objectives
bull Financial objectives wouldinclude the followin
bull Corporate objectives and unit objectives ndash Corporate objectives These objectives
should relate to the key factors for businesssuccess
- Profitability - Customer satisfaction- Market share - Quality of the firmrsquos products- Growth - Human resourcesCash flow
18032014 JT -84 slides 7
ndash Profitability ndash Return on investment (ROI) orreturn on capital employed(ROCE)
ndash Share price earnings per sharedividends
ndash Growth
bull Multiple objectives ndash A firm might identify several
objectives growth Maintainingpolicies acceptable level ofborrowing
bull ec no og ca goa s ndash Technological goals might be stated as
followsbull product design and production
methods using current and newtechnology
bull improve current products through R amp Dbull level of quality
bull Product-market goals ndash Market leadership
ndash Coverage ndash Positioning
ndash Expansion
8122019 BtecBS Part a- Strategic Fomulation (1)
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Definitions amp Setting Standards
process and SMARTbull Standards are the agreed quality measures that are used to
judge whether a task has been satisfactorily completed
bull Performance criteria are the individual standards of performancethat help to judge that work is being done satisfactorily
18032014 JT -84 slides 8
bull Process1 Agree the objectives2 Prioritise the objectives3 Define the activities and tasks4 Agree standards of performance
5 Allocate roles6 Set and timetable performance criteria
bull SMART Specific Measurable Agreed Realistic Timetabled
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
8122019 BtecBS Part a- Strategic Fomulation (1)
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
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The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
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Stakeholder risks
18032014 JT -84 slides 14
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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The role and function of
objectives
a They enable the overall objectives of theorganisation to be broken down into clearstatements of what needs to be done at eachlevel
18032014 JT -84 slides 3
ey prov e c ear s a emen s o w a ac onneeds to be taken
c They provide a focus for all activity
d They provide targets for both individual and
group achievemente They facilitate the control of actual performance
f They provide a basis for evaluating howsuccessfully the plans are being implemented
8122019 BtecBS Part a- Strategic Fomulation (1)
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A hierarchy of objectives
18032014 JT -84 slides 4
8122019 BtecBS Part a- Strategic Fomulation (1)
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Different categories of objectivesbull Strategic objectives such as the mission
and corporate objectives affect thewhole organisation and are normally long-
term
bull Functional objectives relate to a
18032014 JT -84 slides 5
most team objectives as well These aretypically medium-term
bull Individual objectives relate to particularpeople and to their work Most of thesebut by no means all will involve short-term activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Business goals and objectives
18032014 JT -84 slides 6
8122019 BtecBS Part a- Strategic Fomulation (1)
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Types of objectivesbull Primary amp secondary objectives
ndash Some objectives are moreimportant than others
bull Long-term objectives and short-term objectives
bull Financial objectives wouldinclude the followin
bull Corporate objectives and unit objectives ndash Corporate objectives These objectives
should relate to the key factors for businesssuccess
- Profitability - Customer satisfaction- Market share - Quality of the firmrsquos products- Growth - Human resourcesCash flow
18032014 JT -84 slides 7
ndash Profitability ndash Return on investment (ROI) orreturn on capital employed(ROCE)
ndash Share price earnings per sharedividends
ndash Growth
bull Multiple objectives ndash A firm might identify several
objectives growth Maintainingpolicies acceptable level ofborrowing
bull ec no og ca goa s ndash Technological goals might be stated as
followsbull product design and production
methods using current and newtechnology
bull improve current products through R amp Dbull level of quality
bull Product-market goals ndash Market leadership
ndash Coverage ndash Positioning
ndash Expansion
8122019 BtecBS Part a- Strategic Fomulation (1)
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Definitions amp Setting Standards
process and SMARTbull Standards are the agreed quality measures that are used to
judge whether a task has been satisfactorily completed
bull Performance criteria are the individual standards of performancethat help to judge that work is being done satisfactorily
18032014 JT -84 slides 8
bull Process1 Agree the objectives2 Prioritise the objectives3 Define the activities and tasks4 Agree standards of performance
5 Allocate roles6 Set and timetable performance criteria
bull SMART Specific Measurable Agreed Realistic Timetabled
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
8122019 BtecBS Part a- Strategic Fomulation (1)
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
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The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1891
1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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A hierarchy of objectives
18032014 JT -84 slides 4
8122019 BtecBS Part a- Strategic Fomulation (1)
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Different categories of objectivesbull Strategic objectives such as the mission
and corporate objectives affect thewhole organisation and are normally long-
term
bull Functional objectives relate to a
18032014 JT -84 slides 5
most team objectives as well These aretypically medium-term
bull Individual objectives relate to particularpeople and to their work Most of thesebut by no means all will involve short-term activities
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Business goals and objectives
18032014 JT -84 slides 6
8122019 BtecBS Part a- Strategic Fomulation (1)
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Types of objectivesbull Primary amp secondary objectives
ndash Some objectives are moreimportant than others
bull Long-term objectives and short-term objectives
bull Financial objectives wouldinclude the followin
bull Corporate objectives and unit objectives ndash Corporate objectives These objectives
should relate to the key factors for businesssuccess
- Profitability - Customer satisfaction- Market share - Quality of the firmrsquos products- Growth - Human resourcesCash flow
18032014 JT -84 slides 7
ndash Profitability ndash Return on investment (ROI) orreturn on capital employed(ROCE)
ndash Share price earnings per sharedividends
ndash Growth
bull Multiple objectives ndash A firm might identify several
objectives growth Maintainingpolicies acceptable level ofborrowing
bull ec no og ca goa s ndash Technological goals might be stated as
followsbull product design and production
methods using current and newtechnology
bull improve current products through R amp Dbull level of quality
bull Product-market goals ndash Market leadership
ndash Coverage ndash Positioning
ndash Expansion
8122019 BtecBS Part a- Strategic Fomulation (1)
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Definitions amp Setting Standards
process and SMARTbull Standards are the agreed quality measures that are used to
judge whether a task has been satisfactorily completed
bull Performance criteria are the individual standards of performancethat help to judge that work is being done satisfactorily
18032014 JT -84 slides 8
bull Process1 Agree the objectives2 Prioritise the objectives3 Define the activities and tasks4 Agree standards of performance
5 Allocate roles6 Set and timetable performance criteria
bull SMART Specific Measurable Agreed Realistic Timetabled
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
8122019 BtecBS Part a- Strategic Fomulation (1)
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1191
3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1391
The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1891
1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Different categories of objectivesbull Strategic objectives such as the mission
and corporate objectives affect thewhole organisation and are normally long-
term
bull Functional objectives relate to a
18032014 JT -84 slides 5
most team objectives as well These aretypically medium-term
bull Individual objectives relate to particularpeople and to their work Most of thesebut by no means all will involve short-term activities
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Business goals and objectives
18032014 JT -84 slides 6
8122019 BtecBS Part a- Strategic Fomulation (1)
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Types of objectivesbull Primary amp secondary objectives
ndash Some objectives are moreimportant than others
bull Long-term objectives and short-term objectives
bull Financial objectives wouldinclude the followin
bull Corporate objectives and unit objectives ndash Corporate objectives These objectives
should relate to the key factors for businesssuccess
- Profitability - Customer satisfaction- Market share - Quality of the firmrsquos products- Growth - Human resourcesCash flow
18032014 JT -84 slides 7
ndash Profitability ndash Return on investment (ROI) orreturn on capital employed(ROCE)
ndash Share price earnings per sharedividends
ndash Growth
bull Multiple objectives ndash A firm might identify several
objectives growth Maintainingpolicies acceptable level ofborrowing
bull ec no og ca goa s ndash Technological goals might be stated as
followsbull product design and production
methods using current and newtechnology
bull improve current products through R amp Dbull level of quality
bull Product-market goals ndash Market leadership
ndash Coverage ndash Positioning
ndash Expansion
8122019 BtecBS Part a- Strategic Fomulation (1)
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Definitions amp Setting Standards
process and SMARTbull Standards are the agreed quality measures that are used to
judge whether a task has been satisfactorily completed
bull Performance criteria are the individual standards of performancethat help to judge that work is being done satisfactorily
18032014 JT -84 slides 8
bull Process1 Agree the objectives2 Prioritise the objectives3 Define the activities and tasks4 Agree standards of performance
5 Allocate roles6 Set and timetable performance criteria
bull SMART Specific Measurable Agreed Realistic Timetabled
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
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The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
8122019 BtecBS Part a- Strategic Fomulation (1)
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Business goals and objectives
18032014 JT -84 slides 6
8122019 BtecBS Part a- Strategic Fomulation (1)
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Types of objectivesbull Primary amp secondary objectives
ndash Some objectives are moreimportant than others
bull Long-term objectives and short-term objectives
bull Financial objectives wouldinclude the followin
bull Corporate objectives and unit objectives ndash Corporate objectives These objectives
should relate to the key factors for businesssuccess
- Profitability - Customer satisfaction- Market share - Quality of the firmrsquos products- Growth - Human resourcesCash flow
18032014 JT -84 slides 7
ndash Profitability ndash Return on investment (ROI) orreturn on capital employed(ROCE)
ndash Share price earnings per sharedividends
ndash Growth
bull Multiple objectives ndash A firm might identify several
objectives growth Maintainingpolicies acceptable level ofborrowing
bull ec no og ca goa s ndash Technological goals might be stated as
followsbull product design and production
methods using current and newtechnology
bull improve current products through R amp Dbull level of quality
bull Product-market goals ndash Market leadership
ndash Coverage ndash Positioning
ndash Expansion
8122019 BtecBS Part a- Strategic Fomulation (1)
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Definitions amp Setting Standards
process and SMARTbull Standards are the agreed quality measures that are used to
judge whether a task has been satisfactorily completed
bull Performance criteria are the individual standards of performancethat help to judge that work is being done satisfactorily
18032014 JT -84 slides 8
bull Process1 Agree the objectives2 Prioritise the objectives3 Define the activities and tasks4 Agree standards of performance
5 Allocate roles6 Set and timetable performance criteria
bull SMART Specific Measurable Agreed Realistic Timetabled
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
8122019 BtecBS Part a- Strategic Fomulation (1)
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1391
The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1891
1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1991
THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2191
PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
8122019 BtecBS Part a- Strategic Fomulation (1)
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Types of objectivesbull Primary amp secondary objectives
ndash Some objectives are moreimportant than others
bull Long-term objectives and short-term objectives
bull Financial objectives wouldinclude the followin
bull Corporate objectives and unit objectives ndash Corporate objectives These objectives
should relate to the key factors for businesssuccess
- Profitability - Customer satisfaction- Market share - Quality of the firmrsquos products- Growth - Human resourcesCash flow
18032014 JT -84 slides 7
ndash Profitability ndash Return on investment (ROI) orreturn on capital employed(ROCE)
ndash Share price earnings per sharedividends
ndash Growth
bull Multiple objectives ndash A firm might identify several
objectives growth Maintainingpolicies acceptable level ofborrowing
bull ec no og ca goa s ndash Technological goals might be stated as
followsbull product design and production
methods using current and newtechnology
bull improve current products through R amp Dbull level of quality
bull Product-market goals ndash Market leadership
ndash Coverage ndash Positioning
ndash Expansion
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Definitions amp Setting Standards
process and SMARTbull Standards are the agreed quality measures that are used to
judge whether a task has been satisfactorily completed
bull Performance criteria are the individual standards of performancethat help to judge that work is being done satisfactorily
18032014 JT -84 slides 8
bull Process1 Agree the objectives2 Prioritise the objectives3 Define the activities and tasks4 Agree standards of performance
5 Allocate roles6 Set and timetable performance criteria
bull SMART Specific Measurable Agreed Realistic Timetabled
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
8122019 BtecBS Part a- Strategic Fomulation (1)
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
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3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
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The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
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Stakeholder risks
18032014 JT -84 slides 14
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3691
2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Definitions amp Setting Standards
process and SMARTbull Standards are the agreed quality measures that are used to
judge whether a task has been satisfactorily completed
bull Performance criteria are the individual standards of performancethat help to judge that work is being done satisfactorily
18032014 JT -84 slides 8
bull Process1 Agree the objectives2 Prioritise the objectives3 Define the activities and tasks4 Agree standards of performance
5 Allocate roles6 Set and timetable performance criteria
bull SMART Specific Measurable Agreed Realistic Timetabled
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
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3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
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The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
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Stakeholder risks
18032014 JT -84 slides 14
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
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Aspect of the external environment
18032014 JT -84 slides 20
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 MISSION
bull What is a mission ndash The organisations basic function in society
in terms of products services it produce for
its clients
bull Mission statements
18032014 JT -84 slides 9
ndash A broad declaration of an organizationrsquosoverriding purpose
ndash Identifies what is unique or important aboutits products
ndash Seeks to distinguish or differentiate theorganization from its competitors
8122019 BtecBS Part a- Strategic Fomulation (1)
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1391
The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1891
1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
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Aspect of the external environment
18032014 JT -84 slides 20
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
8122019 BtecBS Part a- Strategic Fomulation (1)
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6491
1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
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Mission Statementsbull Mission statement addresses some of the
following ndash Identity of the persons shareholders customers
staff etc
ndash Nature of the firmrsquos business the products it makesthe services it provides the markets it produces foretc
ndash Ways of competing quality innovation technology
18032014 JT -84 slides 10
acquisition geographical spread etc ndash Principles of business commitment to suppliers and
staff social policy for example on non-discriminationor environmental issues commitment to customers
bull Questions that need to be considered whena mission statement is formulated
ndash Who is to be served and satisfied ndash What need is to be satisfied
ndash How will this be achieved
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1191
3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
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The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1891
1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6891
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6991
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1191
3 Corporate Functional ampIndividual
objectives
bull Corporate objectives ndash These are strategic objectives that outline the expectations of
the organisation ndash These are typically Market share Growth Profitability Cash
flow Survival Growth in payments to shareholders Customersatisfaction Quality of productsservices Industrial relations
18032014 JT -84 slides 11
ndash - -
bull Functional objectives ndash These objectives are specific to individual units of an
organisation and are often associated with the tactical oroperational aspects of an organisationrsquos activities
bull Individual objectives ndash These objectives provides members of staff with clear idea of
what they are expected to achieve over a given period ndash Task-related objectives amp Self-development objectives
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1391
The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1591
Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1891
1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1991
THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2191
PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2591
Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2791
Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3291
1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3691
2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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4 Stakeholder analysisbull The effect of stakeholders
bull Stakeholder risks
bull Stakeholder analysis
18032014 JT -84 slides 12
8122019 BtecBS Part a- Strategic Fomulation (1)
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The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1391
The effect of stakeholders
bull Two aspects of stakeholder risk
ndash Varying degrees of risk
ndash Respond
18032014 JT -84 slides 13
bull ree roa ypes o s a e o erInternal stakeholders
Connected stakeholders
External stakeholders
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1891
1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
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Aspect of the external environment
18032014 JT -84 slides 20
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
8122019 BtecBS Part a- Strategic Fomulation (1)
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6491
1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Stakeholder risks
18032014 JT -84 slides 14
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1591
Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Stakeholder analysisbull Primary Stakeholders Roles
ndash (i) Performance role mdash directly involved with adding value(eg Manufacturer Wholesaler retailer)
ndash (ii) Support role mdashsupporting the performing membersrsquo-banks consultancies government
18032014 JT -84 slides 15
stakeholderrsquos group ndash Disruption Can the stakeholder disrupt the organisationrsquos
plans (eg a bank withdrawing overdraft facilities)
ndash Replacement Can the firm replace the relationship
ndash Uncertainty Does the stakeholder cause uncertainty in thefirmrsquos plans A firm with healthy positive cash flows andlarge cash balances need not worry about its bankrsquos attitudeto a proposed investment
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1991
THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2591
Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2691
NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2791
Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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NESTLE Ads (Context to Assignment)
bull httpwwwyoutubecomwatchv=d2ITB0
Dyjb4bull httpwwwyoutubecomwatchv=xTpv9lc
bull httpwwwyoutubecomwatchv=7oynmFuA57U
18032014 JT -84 slides 16
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5491
g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic Formulation
Chapter 2External Environment
18032014 JT -84 slides 17
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1891
1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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1 What is the external environment
Elements of the external environment
bull The political-legal environment
bull The economic environment
18032014 JT -84 slides 18
bull The socio-cultural environmentbull The technological environment
bull The physical environment
8122019 BtecBS Part a- Strategic Fomulation (1)
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THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
8122019 BtecBS Part a- Strategic Fomulation (1)
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
8122019 BtecBS Part a- Strategic Fomulation (1)
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1991
THE EXTERNAL ENVIRONMENT
bull Analysis of the external environment and the trendswhich lead to changes in it can identify threats andopportunities more quickly decrease the likelihood of
major surprises and shorten the firmrsquos reaction time toevents
bull The external environment can be divided into three
18032014 JT -84 slides 19
ndash The physical environment
ndash The social environment
ndash The competitive environment
bull The physical and social environments can be furtherdivided into PESTEL factors ndash Political Economic Socio-cultural Technological
Environmentalecological and Legal
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2791
Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
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Aspect of the external environment
18032014 JT -84 slides 20
8122019 BtecBS Part a- Strategic Fomulation (1)
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
8122019 BtecBS Part a- Strategic Fomulation (1)
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
8122019 BtecBS Part a- Strategic Fomulation (1)
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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PESTEL factors ndash Political and legal
bull Political factors such as changes in political control public priorities fundingarrangements laws which are set by Parliament etc affects organisations inseveral ways
ndash Economicbull The state of the economy affects all organisations both commercial and non-
commercial The economic objectives has an impact in demand andorganisationrsquos decisions
ndash Socio-culturalbull Social and cultural factors affect the make-up of the population and the
lifestyle of society The social and cultural environments are constantly
18032014 JT -84 slides 21
changing Trends identified can assist planners with their task
ndash Technologicalbull Technological change probably has the most rapid persistent and profound
effect influencing the following type of products or services way in whichproducts are made way in which services are provided way in whichmarkets are identified the way in which employees are mobilised and themeans and extent of communications with external clients
ndash Environmentalecologicalbull The physical environment (natural environment) covers the natural conditions
such as the weather floods earthquakes the supply of many raw materialsetc
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Political risk checklist
1 How stable is the host countryrsquos political system
2 How strong is the host governments commitment tospecific rules of the game such as ownership or
contractual rights given its ideology and powerposition
3 How long is the government likely to remain in
18032014 JT -84 slides 22
4 If the present government is succeeded how wouldthe specific rules of the game change
5 What would be the effects of any expected changes
in the specific rules of the game6 In light of those effects what decisions and actions
should be taken now
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6591
Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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The socio-cultural environment
bull Demography is the study of population andpopulation trends
bull Demographic factors
ndash Growth decline rate of populations ndash Changes in the age distribution ndash Population concentration
18032014 JT -84 slides 23
bull society should be considered during the planningprocess and this include ndash Rising standards of living
ndash Societyrsquos attitude and ethical conduct ndash Changes in the workforce
bull The ethical environment incorporates justicerespect for the law and a moral code
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
8122019 BtecBS Part a- Strategic Fomulation (1)
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2791
Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Economic Definition and
International businessbull Protectionism is the imposition of tariffs quotas or other barriers to
trade to restrict the inflow of imports in order to protect domestic
producers from overseas competition
bull Tariffs are taxes imposed on an imported goods
18032014 JT -84 slides 24
bull Quotas are limits that are imposed on the quantity of a particular goodthat is imported
Organisation with plans to trade abroad
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6191
bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
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Threat of
New
Entrants
Threat of
New
Entrants
Threat of
New
Entrants
2 Porterrsquos Five Forces
Model of Competition
2 Porterrsquos Five Forces
Model of Competition
18032014 JT -84 slides 25
Threat of
Substitute
Products
Threat of
Substitute
Products
Rivalry AmongCompeting Firms
in Industry
Rivalry AmongCompeting Firms
in Industry
BargainingPower of
Buyers
BargainingPower of
Buyers
BargainingPower of
Suppliers
BargainingPower of
Suppliers
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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NESTLE- Context to Assignment
bull httpwwwyoutubecomwatchv=d0powJUv5a0
bull httpbusinesscasestudiescouknestleaxzz2vbK1xN43
bull ttp or es n acom v eo v eo nest es-strategy-for-growth-acquisitions34255
18032014 JT -84 slides 26
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6191
bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6491
1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Competitive Environmentbull Definition ndash Competitive advantage is a factor which enables an organisation to
compete successfully with its main competitors on a sustained basis
bull Porter Five competitive forces ndash The threat of new entrants into the industry ndash The threat of substitute products or services (for example taking the
Eurostar train from London to Paris is a substitute for flying there) ndash The bargaining power of customers (who may demand better quality at a
lower price) ndash The bargaining power of suppliers (who may charge higher prices) ndash The rivalry amongst current competitors in the industry (which can lead to
18032014 JT -84 slides 27
price wars new product development and special offers)
8122019 BtecBS Part a- Strategic Fomulation (1)
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
8122019 BtecBS Part a- Strategic Fomulation (1)
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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The threat of new entrants amp substitute
bull A new entrant into an industry will bring extra capacity and morecompetition The strength of this threat is likely to vary from industry toindustry and depends on two things ie Barriers to entry amp response ofexisting competitors
Barriers to entrybull Scale economiesbull Product differentiationbull
18032014 JT -84 slides 28
bull Switching costsbull Access to distribution channelsbull Cost advantages of existing producers independent of economies of
scale include Patent Experience Government subsidies andregulations Favoured access to raw materials
bull Substitute DefinitionA substitute product is a goods or service produced by another industrywhich satisfies the same customer needs
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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The bargaining power of customers amp suppliers
The bargaining power ofcustomers
bull Customers want betterquality products and
services at a lower price ndash How much customerbuys
ndash How critical the product isto the customerrsquos own
bull The bargaining power ofsuppliers
bull Suppliers can exert pressure forhigher prices
bull Dominant suppliers able tocharge monopoly or oligopolyprices
18032014 JT -84 slides 29
ndash Switching costs ndash Standard items (henceeasily copied)
ndash Customerrsquos ownprofitability
ndash Customerrsquos ability to
bypass ndash Skills of purchasingstaff or the price-awareness of consumers
ndash Product quality
bull Suppliers do not rely on theindustry for the majority of theirsales
bull Importance of the supplierrsquosproduct to the customer
bull Differentiated productbull Is switching costs high
8122019 BtecBS Part a- Strategic Fomulation (1)
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
8122019 BtecBS Part a- Strategic Fomulation (1)
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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The rivalry amongst current
competitors in the industryThe rivalry amongst current competitors in the industrybull The intensity of competitive rivalry within an industry will
affect the profitability of the industry as a wholeCompetitive actions Factors determining the intensity of competition ndash
18032014 JT -84 slides 30
growth is slow or stagnant ndash Cost structure Higher fixed cost ndash Switching (Coca Cola vs Pepsi) Suppliers will compete if
buyers switches easily ndash Strategic importance If success is prime strategic objective
firms will likely to act very competitively ndash Exit barriers Difficult for an existing supplier to leave the
industry
P A
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Part A
Strategic FormulationChapter 3 Internal Analysis
18032014 JT -84 slides 31
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1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
8122019 BtecBS Part a- Strategic Fomulation (1)
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
8122019 BtecBS Part a- Strategic Fomulation (1)
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
8122019 BtecBS Part a- Strategic Fomulation (1)
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5491
g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3291
1 The position audit resources
and limiting factorsbull Definitions
bull Limiting factors
bull Resource use
18032014 JT -84 slides 32
1 1 D fi iti
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
8122019 BtecBS Part a- Strategic Fomulation (1)
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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11 Definitions
bull Position audit is part of the planning process whichexamines the current state of the entity Examples of factorsexamined tangible and intangible assets brands andmarkets operating systems current results financialresources
bull Resource audit is a review of all aspects of the resources theorganisation uses including physical financial and systems
bull f f
18032014 JT -84 slides 33
limit the activity of an entity where-by there is shortage ordifficulty of supply
bull Effectiveness is the measure of achievement and isassessed by reference to goals
bull Efficiency is a combination of effectiveness and economybull Economy is reduction or containment of cost There will
normally be a trade-off between effectiveness and economy
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Efficiency vs Effectivenessbull Efficiency is doing the thing right
Effectiveness is doing the right thingPeter Drucker
18032014 JT -84 slides 34
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11 Definitions
18032014 JT -84 slides 35
8122019 BtecBS Part a- Strategic Fomulation (1)
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
8122019 BtecBS Part a- Strategic Fomulation (1)
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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11 Definitions
18032014 JT -84 slides 35
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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2 Competency and critical
success factorsbull Core Competency Nike (Designing
Product Development endorsement
18032014 JT -84 slides 36
bull repar ng resource p ann ng
Core Competency
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Core Competencybull Strategic approach involves indentifying a firmrsquos competences
These competences develop in a variety of ways ndash Experience in making and marketing a product or service ndash The talents and potential of individuals in the organisation ndash The quality of co-ordination
bull The distinctive competence of an organisation is what it doeswell or better than its rivals
18032014 JT -84 slides 37
bull ests or ent y ng a core competence
ndash It provides potential access to a wide variety of markets ndash It contributes significantly to the value enjoyed by the
customer ndash It should be hard for a competitor to copy
In many cases a company might choose to combinecompetences
P i l
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
8122019 BtecBS Part a- Strategic Fomulation (1)
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6491
1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Preparing resource plans
bull Competences can be related to critical success factors ndash Critical success factors (CSFs) are those factors on
which the strategy is fundamentally dependent for itssuccess- Customer Care Centre (CC)
ndash Key tasks are what must be done to ensure each criticalsuccess factor is satisfied- Many Key Task in CC
18032014 JT -84 slides 38
ndash Priorities indicate the order in which tasks arecompleted- Urgent task should be prioritize
bull Competences thus fulfil the CSF
3 C i h (Th l h i )
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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3 Converting the resources (The value chain)
bull Activities are the means by which a firm creates valuein its products (They are sometimes referred to as valueactivities)
bull The value chain
18032014 JT -84 slides 39
bull
The value chain model of corporate activitiesdeveloped by Michael Porter (1996) offers a birdrsquos eye
view of the firm and what it does Competitiveadvantage says Porter arises out of the way in whichfirms organise and perform activities
The value chain
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
8122019 BtecBS Part a- Strategic Fomulation (1)
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
8122019 BtecBS Part a- Strategic Fomulation (1)
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chain
bull Porter (1996) grouped the various activities of anorganisation into a value chain Here is a diagram
18032014 JT -84 slides 40
The value chain
8122019 BtecBS Part a- Strategic Fomulation (1)
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
8122019 BtecBS Part a- Strategic Fomulation (1)
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
8122019 BtecBS Part a- Strategic Fomulation (1)
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
8122019 BtecBS Part a- Strategic Fomulation (1)
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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The value chainbull The margin is the excess the customer is prepared to pay over the cost to
the firm of obtaining resource inputs and providing value activitiesbull Primary activities are directly related to production sales marketingdelivery and service
bull Support activities provide purchased inputs human resources technologyand infrastructural functions to support the primary activities
18032014 JT -84 slides 41
8122019 BtecBS Part a- Strategic Fomulation (1)
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
8122019 BtecBS Part a- Strategic Fomulation (1)
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
8122019 BtecBS Part a- Strategic Fomulation (1)
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
8122019 BtecBS Part a- Strategic Fomulation (1)
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
8122019 BtecBS Part a- Strategic Fomulation (1)
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
8122019 BtecBS Part a- Strategic Fomulation (1)
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm
N0iTqA
18032014 JT -84 slides 42
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4391
Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
8122019 BtecBS Part a- Strategic Fomulation (1)
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Value system
18032014 JT -84 slides 43
bull Invent new or better ways to do activitiesbull Combine activities in new or better waysbull Manage the linkages in its own value chainbull Manage the linkages in the value system
Th d t lif l
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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The product life cycle
bull Product nature ndash Product class - Category of product(cars washing mc news
paper)
ndash Product form- different form (national daily or weekly local newspaper)
18032014 JT -84 slides 44
bull Planners should assess products in ndash Stage of its life cycle
ndash Productrsquos remaining life
ndash Urgency in the need to innovate to developnew and improved products
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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4 Outputs ndash The product portfolio
bull The product life cycle
bull Portfolio Panning ndash The Boston Matrix
18032014 JT -84 slides 45
8122019 BtecBS Part a- Strategic Fomulation (1)
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Portfolio planning the Boston Matrix
bull Market share One entityrsquos sale of a product or servicein a specified market expressed as a percentage of total
sales by all entities offering that product or service
18032014 JT -84 slides 46
5 O i i
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
8122019 BtecBS Part a- Strategic Fomulation (1)
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6191
bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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5 Organisation structure
Organisation structure determines how work isallocated directed and controlled in order to achievethe goals of the organisationrsquos strategy
bull Co-ordinating tasks
18032014 JT -84 slides 47
bull Components of organisation structure and systems
bull Hierarchy and span of control
bull The 7s framework
8122019 BtecBS Part a- Strategic Fomulation (1)
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8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
8122019 BtecBS Part a- Strategic Fomulation (1)
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
8122019 BtecBS Part a- Strategic Fomulation (1)
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy and span of control
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Hierarchy and span of controlOrganisation Structurebull Power centres which control its effortsbull Divisions of responsibilitybull Division of labour
bull Substitution of personnelbull Ability to group personnel in different ways according to work
Reviewin existin or anisation structure
18032014 JT -84 slides 50
1 can help or hinder the mission and effectiveness of the
organisation2 might have to be changed and these takes time3 can shapes the deployment of value activities and the
management of the linkages between them
4 provide channels and filters information from markets andpersonnel5 Is an arena for various political manoeuvrings by management
and other interest groups
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Hierarchybull The span of control (unit size) refers to the number of
subordinates working for a manager in the levelimmediately below the manager
bull The scalar chain (or chain of command) describes theorganisationrsquos hierarchy from the most junior to the
18032014 JT -84 slides 51
many ranks between the most junior and the senior
bull Organisation hierarchy can be ndash Tall organisation structure
ndash Flat organisation structure
ndash Informal organisation structure
ndash Delayering- removal of management layer
Hierarchy
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Hierarchy
bull Flat organisations ndash more flexible and responsive ndash does save costs in
management salaries ndash IT used to reduce information
processing function of middlemanagement
ndash Allows empowerment
bull
bull Tall organisation ndash large number of
management levels ndash small spans of control
ndash can be cumbersome andinflexible ndash slow down
communications
18032014 JT -84 slides 52
ndash work social relationships thatexist outside the formalorganisation structure
ndash depends on individualpersonalities
ndash affected when someoneleaves ndash certain individuals have
significant influence outside oftheir formal authority
ndash s ow respons veness to
market ndash Sometimes offer more
secure promotion paths
bull Delayering ndash removal of management
layers
Figure 35 The 7s framework
(S Mi t b amp Q i Th St t
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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(Source Mintzberg amp Quinn The Strategy
Process 1999)
18032014 JT -84 slides 53
1 Structure ndash How does the organisation actually work Which parts are important in
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y p pfocussing on what the organisation does best
2 Systems ndash Formal and informal procedures Eg management information systemwhich provides data (sales figures customer data and so on) on which tobase decisions
3 Staff ndash Management development to take the company forward The socialisation
process (Quinn) of a company Staff as resources to be developed andallocated
4 Skills ndash Characterise companies by what they do best Example the Amazon
18032014 JT -84 slides 54
Internet bookshop - speed of delivery
5 Strategy ndash An important influence on organisational design as it is the organisationrsquos
plan as to how it is going to create value6 Style
ndash Patterns of management action and behaviour that guide the thinking of the
organisation7 Super-ordinate goals ndash Main values of the business lsquoSuperordinatersquo literally means lsquoof higher orderrsquo
and such goals go beyond conventional objectives and may indicate theoverall future direction that management is aiming for
MARKETING AUDIT AND THE CUSTOMER BASE
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
8122019 BtecBS Part a- Strategic Fomulation (1)
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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MARKETING AUDIT AND THE CUSTOMER BASE
bull A marketing audit involves a review of an organisation sproducts and markets the marketing environment and itsmarketing system and operations The profitability of eachproduct and each market should be assessed and the costs
of different marketing activities establishedbull Information obtained about markets ndash Size of the customer base ndash Size of individual orders
18032014 JT -84 slides 55
ndash Sales revenue and profitability ndash Segments ndash Market share ndash Growth - Sales growth and contribution growth over the previous four
years or so for each product group
ndash Products demand is growing stable or likely to decline ndash Demand sensitivity ndash Tendency for the market to become fragmented with more specialist
and custom-made products
Customers
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
8122019 BtecBS Part a- Strategic Fomulation (1)
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
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Key customer analysis calls for seven main areas of investigation
1 Customer attitudes and behaviour ndash Interpersonal factors affect sales buying competitorsrsquo products buying
postponed emotional factors in buying decisions
2 Key customer identity ndash name location size product market
3 Relationship of customer to potential market ndash customer size in relation to total end-market expand diversify integrate
4 Customer history
18032014 JT -84 slides 56
ndash
5 Relationship of customer (product) ndash are products purchased to be resold No - why bought Products form part
of customers serviceproduct
6 Financial performance of the customer ndash customer success in his own markets
7 Profitability of selling to the customer ndash Profitcontribution (after discounts selling and delivery costs) financial
consequences of losing customer buying in order sizes unprofitable tosupply roi in plant used etc
STRATEGIC POSITIONING I amp 2 pg67-102
8122019 BtecBS Part a- Strategic Fomulation (1)
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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STRATEGIC POSITIONING I amp 2 pg67 102
STRATEGIC
Corporate Appraisal(SWOT analysis)
Gap analysis
Benchmarking
18032014 JT -84 slides 57
POSITIONING
I amp 2
Competitors
Using value chainIn competitive
strategy
Scenarioplanning
Generalcompetingstrategy
Product Marketstrategy
Methodof growth
factors
1 CORPORATE APPRAISAL (SWOT)
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Corporate appraisal (SWOT) ndash critical assessment of the strengths and weaknesses
opportunities and threats
ndash relation with internal amp environmental factors to
establish condition ndash prior to the preparation of a long-term plan
18032014 JT -84 slides 58
bull If anyone says ldquoXrdquo is both our greatest strengthand our greatest weakness they are wrong
bull It just means you need to think harder about what
is it about ldquoXrdquo that creates a strength and whatcreates a weakness
Customer-Oriented SWOT Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Customer Oriented SWOT Analysis
Strengths Weaknesses
The New Rules
Strengths andWeaknesses mustbe recognized bycustomers
Matchingstrategies
Conversionstrategies
18032014 JT -84 slides 59
Opportunities Threats
Opportunities andThreats exists inthe environment
not because of us
Conversionstrategies
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 60
Strong market position and good brand
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
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18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Strong market position and good brand
(19th Place)
18032014 JT -84 slides 61
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
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g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6291
Weaknesses (1)ldquoWe are an old-established firmrdquo
18032014 JT -84 slides 62
Strengths
Stable suppliers for after-salesserviceTrustworthyExperienced
Weaknesses
InflexibleOld-fashionedNo innovations
Breaking Down Strengths and
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6491
1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6591
Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6891
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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Weaknesses (2)ldquoWe are a large supplierrdquo
18032014 JT -84 slides 63
Strengths
Comprehensive productrange and technicalexpertiseStatusstability is
reassuring
Weaknesses
BureaucraticOffhand with customersNo continuity of personalcontacts
bullAs well as making SWOT customer-oriented amp environmental
you need to screen out meaningless ldquomotherhoodrdquo statements
MAJOR PRODUCTS AND SERVICES
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6491
1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6891
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
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Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
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Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
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ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
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MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
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bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
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Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
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identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
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18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
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1 Television sets2 Television accessories
3 Home theater systems4 Home theater
projectors5 Blu-ray
6 DVD players
1 Desktop monitors2 Printers3 Projectors
4 Hard disk drive
5 Optical disc drive6 Refrigerators
18032014 JT -84 slides 64
7 Mobile phones
8 Mobile phoneaccessories
9 MP3 players
10 Digital cameras11 Camcorders12 Digital photo frames
8 Dishwashers9 Microwaves10Air conditioners
991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155991260983117983151983156983144983141983154983144983151983151983140991261983072983123983156983154983141983150983143983156983144983155983072983123983156983137983156983141983149983141983150983156983155
8122019 BtecBS Part a- Strategic Fomulation (1)
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Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
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bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6891
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
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5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6591
Strengths Please tickappropriate
boxes
Hidden Meanings
High quality We canrsquot think of any real reason why
we do business in this market
Low price That must explain it
Personal service We still canrsquot
18032014 JT -84 slides 65
High value to customers Our products are a bit expensive but
we still sell some
Old-established firm We must be OK wersquove survived so far
Technologically sophisticated We know more than the customer
Product strengths Look at the product never mind thecustomer
The lsquonaturalrsquo supplier to thismarket
We donrsquot know who our competitors are
We are the industry standard We donrsquot think we have any competition
2 GAP ANALYSIS
bull Forecasting
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6891
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6991
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6691
bull Forecasting
ndash Identification of relevant factors and ndash quantification of their effect on an entity as a basis for
planning
bull Gap analysis ndash The comparison of an entityrsquos ultimate objective with
the sum of projections and already planned projects
18032014 JT -84 slides 66
ndash Organisationrsquos targets for achievement over theplanning period ndash Organisation expectation to achieve if carried on in
current way with the same products and selling to the
same markets with no major changes to operations ndash The F0 forecast
ndash Gap could be filled by new product-market growthstrategies
Strategies for closing the gap
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6891
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6991
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6791
18032014 JT -84 slides 67
Strategic planning exercise (gap analysis) 11
revenue revenue
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6891
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6991
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
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Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
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ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6891
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS
(Capital Utilisation)
Finally list the value of any new productsyou might develop for new markets untilpoint E is reached (Steps 3 4 and 5represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture
(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the sales position you wish to achieve at the
end of the planning period point E(B) Next plot the forecast revenue position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under the
following headings Plot the total value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix (1)
Better Sales Calls (4)
Charge For Deliveries
Better Customer Mix (2)
Increase Price
More Sales Calls (3)
Reduce Discounts
Total
RevenueProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 68
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in current
sales and achievable sales value during the planning period
(B) Next plot the market penetration position point C This point
will be the addition of all the values in the right hand half of thesmall boxes in the Ansoff Matrix If there is a gap proceed to 4below Please note revenue from (1) (2) (3) and (4) from theproductivity box should be deducted from the market penetrationtotal before plotting pointC
Next list the value of any new p roducts you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is still a gap proceed to 5
Market 1
t + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
Ect
Amm5spexerc1cdr
Ect
Ect
Strategic planning exercise (gap analysis) 2 profit 2 profit
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6991
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6991
5 GAP ANALYSIS(Diversification)
6 GAP ANALYSIS(Capital Utilisation)
Finally list the profit value of any newproducts you might develop for newmarkets until point E is reached (Steps 3 4and 5 represent a sales growth focus)
If none of this gives the required return oninvestment consider changing the assetbase This could be(A) Acquisition(B) Joint Venture(Step 6 represents a capital utilisationfocus)
1 OBJECTIVE(A) Start by plotting the profit position you wish to achieve at theend of the planning period point E(B) Next plot the forecast profit position point A
2 GAP ANALYSIS (Productivity)Are there any actions you can take to close the gap under thefollowing headings Plot the total profit value of these on the GapAnalysis Graph on the left point B (These represent cash andmargin focus) Now proceed to 3 below
E (Objective)
D (New ProductsMarkets)
C (Market Penetration)
B (Productivity)
A (Forecast)
Better Product Mix
Better Sales Calls
Charge For Deliveries
Better Customer Mix
Increase Price
Reduce Debtor Days
More Sales Calls
Reduce Discounts
ProfitProductivity (NB Not allfactors are mutually exclusive)
Rev Vol
18032014 JT -84 slides 69
3 GAP ANALYSIS
4 GAP ANALYSIS
ANSOFF PRODUCTMARKET (MARKET PENETRATION)
ANSOFF PRODUCTMARKET MATRIX (NEW PRODUCTSNEW MARKETS)
(A) List principle products on the horizontal axis and principlemarkets on the vertical axis In each smaller square write in currentprofit and achievable profit value during the planning period
(B) Next plot the market penetration position point C This pointwill be the addition of all the values in the right hand half of the
small boxes in the Ansoff Matrix If there is a gap proceed to 4below
Next list the value of any new products you might develop whichyou might sell to existing markets Alternatively or as well as ifnecessary list the value of any existing products that you might sellto new markets Plot the total value of these on the Gap AnalysisGraph above point D If there is st ill a gap proceed to 5
Market 1
ost e uct on
Others (Specify)
Totalt + 0 t + 1 t + 2 t + 3 (budget)
Market 1
Market 10
P r o d
u c t 1
P r o d
u c t 1
P r o d
u c t 1
0
P r o d
u c t 2
P r o d
u c t 2
P r o d
u c t 1
1
P r o d
u c t 3
P r o d
u c t 3
P r o d
u c t 1 2
E t c
E t c
E t c
Market 3Market 3
Market 12
Market 2Market 2
Market 11
EctEct
Ect
3 MONITORING COMPETITORSbull Why Analysis
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7091
Why Analysis
ndash assess what they will do ndash to respond accordingly ndash competitive position
bull Aspects of competitor analysis (key questions) relates tocompetitorrsquos ndash future goals
18032014 JT -84 slides 70
ndash
ndash position ndash current strategy ndash capabilities
bull Future goals - Reviewing competitorrsquos assessed futuregoals 2 things ndash current position ndash response to strategic changes
Aspects of competitor analysis
Useful information about
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7191
bull Information on competitorrsquos goals ndash What are the businessrsquos statedfinancial goals
ndash What trade-offs are made betweenlong-term and short-term
objectives ndash What is the competitorrsquos attitude to
risk
ndash Do managerial beliefs affect its
bull Useful information aboutcompetitor assumptions ndash What does a competitor believe to
be its relative position (in terms ofcost product quality etc) in theindustry
ndash Is there a strong emotional bondwith particular products andmarkets
18032014 JT -84 slides 71
goals
ndash Organisation structure what is therelative status of each department
ndash What incentive systems are inplace
ndash What are the managers like Are
they divided against each other ndash Does the business cross-subsidise
others Is it a cash cow
ndashdifferences influence the waymanagers think
ndash What does the competitor believeabout the future demand for theindustry
ndash Does the competitor accept theindustryrsquos lsquoconventional wisdomrsquoCareer analysis of key managersAn accountant in charge is likely tohave different priorities from amarketer
Aspects of competitor analysis ndashCurrent strategies and capabilities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7291
Current strategies and capabilities
bull Current strategy
ndash Marketing productspromotions price etc
ndash Operations research
bull Capabilities - twomain aspects
ndash Core or distinctive
competences
18032014 JT -84 slides 72
eng neer ng e c
ndash Financial strengthsoverall costs etc
ndash Managerial ability
general managerialskills etc
ndash Ability to expand in a
particular market(production capacity
raising capital
adapting to changesurvival in longedbattles etc)
Competitor - respond amp intelligent systemsbull Competitor response profiles should indicate two things
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7391
bull Competitor response profiles should indicate two things ndash Competitorrsquos vulnerability (eg environmental forces
competitorsrsquo actions or downturn in sales etc)
ndash Battleground (eg invading competitorrsquos weak market low-priority product range Lexus etc)
bull Competitor intelligence system
a) Contents
18032014 JT -84 slides 73
bull Information from common customers and suppliersbull Inspection of a competitors products
bull Information from former employees
bull Job advertisements
b) Processingbull Data compiled catalogued easy access analysed
extrapolating etc
4 GENERIC COMPETITIVE STRATEGIES
HOW TO COMPETE
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7491
bull Competitive strategy ndash lsquotaking offensive or defensive actions to create a dependable position
in an industry to cope with competitive forces and thereby yield asuperior return on investment for the firm Firms have discoveredmany different approachs to this end and the best strategy for a
given firm is ultimately a unique construction reflecting its particularcircumstancesrsquo (Porter 1996)
bull Cost Leadership
18032014 JT -84 slides 74
ndash
bull Differentiation ndash Exploitation of a productservice which the industry as a wholebelieves to be unique
bull Focus ndash Involves a restriction of activities to only part of the market (a
segment) throughbull Providing goodservices at lower cost to that segmentbull Providing a differential productservice to that segment
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7591
Advantages industry-wide strategies
bull Economies of scale bull Brand loyalty and
Cost leadership Differentiation
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7691
bull Economies of scaleraise entry barriers
bull Firm is not sovulnerable as its lesscost-effective
competitors to thethreat of substitutes
bull Customers cannot drive
y y
perceived uniqueness areentry barriers
bull Customer loyalty againstsubstitutes is a weapon
bull Customers alternative
bull New entrants
bull Substitutes
bull
18032014 JT -84 slides 76
than the next most
efficient competitorbull Flexibility to deal with
cost increases
bull Firm remains profitable
when rivals go underthrough excessive pricecompetition
ave no compara e
bull Higher margins can offsetvulnerability to supplierprice rises
bull Brand loyalty should lowerprice sensitivity
bull Suppliers
bull Industryrivalry
Disadvantages industry-wide strategies
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7791
g y g
18032014 JT -84 slides 77
Focus (or niche) strategy
bull Cost-focus strategy
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7891
ndash To be a cost leader for a particular segment This type of strategy isoften found in the printing clothes manufacture and car repairindustries
bull Differentiation-focus strategy
ndash Differentiation for a chosen segment Luxury goods are the primeexample of such a strategy
bull Advantages of a focus strategy ndash A niche is more secure and a firm can insulate itself from com etition
18032014 JT -84 slides 78
ndash The firm does not spread itself too thinly
bull Drawbacks of a focus strategy ndash The firm sacrifices economies of scale which would be gained by
serving a wider market ndash Competitors can move into the segment with increased resources
(eg the Japanese moved into the US luxury car market to competewith Mercedes and BMW) ndash The segments needs may eventually become less distinct from the
main market
5 USING THE VALUE CHAIN INCOMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 7991
bull The two supermarkets represented are based
on the following
ndash The value chain in 43(a) is based on Marks andSpencer foods which seeks to differentiate on qualityand service Hence the no quibble refunds the use of
18032014 JT -84 slides 79
prime retail sites and customer care training
ndash The value chain in 43(b) is similar to that of Lid alsquodiscountrsquo supermarket chain which sells on pricepursuing a cost leadership or perhaps more
accurately a cost-focus strategy This can be seen inthe limited product range and its low-cost sites
COMPETITIVE STRATEGY
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8091
18032014 JT -84 slides 80
6 SCENARIO PLANNING
bull Scenario
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8191
ndash An internally consistent view of what the future might turn out to
bull Macro scenarios ndash Use macro-economic or political factors creating alternative views of
the future environment (eg global economic growth political changesinterest rates)
bull Industry scenario ndash Internally consistent view of an industryrsquos future structure
18032014 JT -84 slides 81
bull Steps in scenario planning ndash Step I - Decide on the drivers for change ndash Step 2 - Bring drivers together into a viable framework ndash Step 3 - Produce seven to nine mini-scenarios ndash Step 4 - Group mini-scenarios into two or three larger scenarios
containing all topics ndash Step 5 - Write the scenarios ndash Step 6 - Identify issues arising
Part 2
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8291
18032014 JT -84 slides 82
Product-market mix is term for the productsservices a firmsells (or a service which a public sector organisation provides)and the markets it sells them to
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8391
MarketPenetration
ProductDevelopment
Present New
increasing technological newness
Present
PRODUCTSAnsoff matrix
18032014 JT -84 slides 83
(uarruarruarruarrmktprod share uarruarruarruarrfreq amp
qty of use new application)
(Product improvement productline extension new product)
MarketExtension
(Market amp geographicalExpansion new segment
Customer group)
Diversification(vertical forward backwardIntegration diversificationrelated andor unrelated
Businesses)
increasingmarket
newnessNew
MARKETS
Figure42 pp110
Method of growth amp Global Factors
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8491
bull Method of growth
ndash Internal external
bull International business ndash Depends on the countryrsquos government
18032014 JT -84 slides 84
position industries etc
ndash One key barrier ndash Protectionism (restrict
competition from overseas)
ndash Quotas bans restrictions tariffs qualityabuse
Global market
Global nature
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8591
bull Depends on the industry (countries that are subjected to managed tradeand services) ndash Eg prohibiting firms from other countries from selling insurance
bull Unlikely to be true global market for labour ndash Disparity in skills between different countries restrictions on immigration
bull Depends on the market ndash Upmarket luxury goods (requirement or affordability in developing nations orcertain locations)
ndash Some goodservice sold almost anywhere but to limited degrees (television
18032014 JT -84 slides 85
Global drivers
bull Financial factors countrycontinent alliances legal factors stock marketstrading (commodities) protectionist measures
Effect of globalisation on the firmbull Lower barriers to entry hence incoming competitionbull Opportunities to compete abroad via exports
bull Opportunities to invest abroadbull Opportunities to raise finance from overseas sources of capital
Porterrsquos Diamond of
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8691
ldquoNational Competitive Advantagerdquo
18032014 JT -84 slides 86
Success in trade comes from the interaction of the country and the firmrsquos specificelements
Analysing the diamondFactor conditions Demand conditions the home
k
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8791
bull Factor conditions are a countryrsquosinputs to production ndash Infrastructure capital human
resources physical resourcesand knowledge
bull Porter distinguishes betweenbasic and advanced factors ndash Basic factors are natural
resources climate semiskilled
marketbull No cultural impediments to
communicationbull Segmentation of the home market
shapes a firmrsquos priorities
bull Anticipating buyer needs(consumer needs home earlierthan world market benefits firmrsquosfrom experience)
18032014 JT -84 slides 87
ndash Advanced factors include
modern digital communicationshighly educated personnel (egcomputer scientists) researchlaboratories and so forth Theyare necessary to achieve highorder competitive advantages
bull The rate of growth Slow growinghome markets do not encouragethe adoption of state of the arttechnology
bull Early saturation of the homemarket will encourage a firm toexport
bull Sophisticated and demandingbuyers set standards
Diamond determinantsRelated amp supporting Industries amp Firms strategy structure and
rivalry
Fi t t t t d i l
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8891
Related and supporting industries
bull Supplying industries in the homebase has several advantages indownstream industries
ndash Efficient early rapid andsometimes preferential access tothe most cost-effective inputs
Firm strategy structure and rivalrybull One country differs from another
with regard to managerial systemsand philosophies and with regardto capital markets
bull Institutional environments thatallow firms to take a long-term viewcontribute positively to
18032014 JT -84 slides 88
ndash
ndash Innovation and upgrading
bull Competitive success in oneindustry is linked to success inrelated industries
bull A competitive domestic supplier
industry is better than relying onwell-qualified foreign suppliers
bull Presence of a large number ofcompeting firms or rivals in thedomestic industry ndash Competition among firms is
necessary for allocated efficiencyin a market system but domestic
rivalry contributes to dynamictechnological efficiency
wwwswlearningcomeconomicsreinertreinert1e ppt ch11ppt
BenchmarkingBenchmarkingbull The establishment through data gathering of targets and comparators through whose
use relative levels of performance (and particularly areas of underperformance) can be
identified
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 8991
identified ndash By adopting identified best practices it is hoped that performance will improve
Types of benchmarkingbull Competitive benchmarking
ndash Information gathered and compared with direct competitors
bull Strategic benchmarking
ndash Type of competitive benchmarking aimed at strategic action and organisational changebull Internal benchmarking
ndash Comparing one operating unit or function with another within the same industry
bull Functional benchmarking
18032014 JT -84 slides 89
ndash Internal functions compared with best external practitioners of those functions regardless of theindustry they are in (also known as operational benchmarking or generic benchmarking)
Advantages of Benchmarkingbull Position audit
ndash assess a firmrsquos existing position and provide a basis for establishing standards of performance
bull Comparisons ndash carried out managers (eg exercise results)
bull Focuses on key areas ndash For improvement sets achievable challenging targets
bull Information sharing ndash can spur innovation
Three levels of benchmarking
Level of benchmarking Through Examples of measures
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9091
bull Resource audit bull Revenue per employee ndash Capital usage ndash Quality of resources
bull Quantity of resources ndash Qualifications of employees ndash Age of machinery
Resources
Level of benchmarking Through Examples of measures
18032014 JT -84 slides 90
bull Analysingactivities
bull Analysingoverallperformances
ndash
bull Sales calls per salespersonbull Output per employeebull Materials wastage
bull Market sharebull Profitabilitybull Productivity
Competences inseparate activities
Competences inlinked activities
8122019 BtecBS Part a- Strategic Fomulation (1)
httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191
18032014 JT -84 slides 91
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