91
Part A Strategic Formulation Chapter 1Objectives 18/03/2014 JT -84 slides 1

BtecBS Part a- Strategic Fomulation (1)

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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

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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

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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

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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

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

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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

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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

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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

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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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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

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)

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

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

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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

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)

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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

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

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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

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

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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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 491

A hierarchy of objectives

18032014 JT -84 slides 4

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 591

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)

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)

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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)

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4491

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5591

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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

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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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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

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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

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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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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

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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)

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

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 491

A hierarchy of objectives

18032014 JT -84 slides 4

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 591

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 791

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1291

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)

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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)

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)

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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

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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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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

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

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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

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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

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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

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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

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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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2491

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)

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3391

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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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)

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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)

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)

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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)

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

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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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Business goals and objectives

18032014 JT -84 slides 6

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 791

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1691

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1791

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

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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)

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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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)

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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

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

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)

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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)

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

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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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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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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

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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

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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

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

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

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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

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

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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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4291

Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm

N0iTqA

18032014 JT -84 slides 42

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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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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)

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

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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)

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

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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

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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

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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)

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

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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

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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)

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)

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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)

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-1 991

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

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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

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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

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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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4491

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)

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

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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)

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

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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

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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)

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)

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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 1091

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1291

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)

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)

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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)

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

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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

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5091

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5591

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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)

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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)

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)

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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)

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)

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)

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)

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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)

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)

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1691

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2391

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2491

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2891

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3191

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3391

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3591

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

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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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4291

Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm

N0iTqA

18032014 JT -84 slides 42

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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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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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)

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

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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

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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

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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

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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

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

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

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

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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

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

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

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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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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

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)

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 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)

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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

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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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3591

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3791

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3891

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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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3991

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4091

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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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4491

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4591

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4791

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4991

Hierarchy and span of control

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5091

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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

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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

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)

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)

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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 1491

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 1691

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)

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)

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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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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

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

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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

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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

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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

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

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)

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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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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

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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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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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2391

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2491

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)

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2991

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

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

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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

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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

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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

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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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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

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

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

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

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)

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)

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

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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

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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)

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)

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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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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)

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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)

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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)

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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

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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)

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)

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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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2391

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)

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2991

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

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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)

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

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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

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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

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

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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

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 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

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

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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3591

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

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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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4291

Value Chain Videosbull httpwwwyoutubecomwatchv=dpSsm

N0iTqA

18032014 JT -84 slides 42

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4491

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4591

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4791

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4991

Hierarchy and span of control

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5091

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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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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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2491

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)

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

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4291

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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)

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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

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)

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

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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

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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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2991

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3391

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4091

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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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

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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

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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)

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)

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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)

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)

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18032014 JT -84 slides 91

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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2391

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

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

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

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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5091

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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

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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)

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)

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

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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

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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

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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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

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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)

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)

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18032014 JT -84 slides 91

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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2391

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)

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2991

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3091

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)

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

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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

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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

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)

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

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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

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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)

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 2491

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

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

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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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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)

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

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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

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

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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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3091

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

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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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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

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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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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

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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

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

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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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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

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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

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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)

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)

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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 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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 2991

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

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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

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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

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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

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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

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

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 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

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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

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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

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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

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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

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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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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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

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3091

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

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

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

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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

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

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

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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

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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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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

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

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

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

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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

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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)

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)

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)

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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)

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

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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)

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)

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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

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

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

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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

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

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

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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

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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

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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

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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

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

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

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

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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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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

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4091

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4591

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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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5391

(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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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)

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

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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

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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)

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

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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)

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)

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3591

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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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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

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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

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

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

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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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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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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)

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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)

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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

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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

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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)

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)

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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)

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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

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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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)

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

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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)

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)

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)

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 3991

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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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

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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)

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

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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

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

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

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)

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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)

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)

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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

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4091

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5091

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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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

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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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

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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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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)

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

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4591

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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)

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

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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

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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

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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)

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)

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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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4491

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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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5391

(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

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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

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

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)

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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)

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

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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)

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

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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

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

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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

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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

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

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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 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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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

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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

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)

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)

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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)

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)

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4591

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4691

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

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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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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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

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)

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

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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)

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)

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

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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

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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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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

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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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httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 4791

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)

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

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5691

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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)

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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

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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)

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)

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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)

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)

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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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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)

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

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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

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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)

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)

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)

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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)

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

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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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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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)

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

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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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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5291

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

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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

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

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

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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

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

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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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

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)

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)

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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)

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

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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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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

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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)

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)

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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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(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

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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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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

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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)

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)

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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)

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

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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)

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

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18032014 JT -84 slides 91

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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 5891

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)

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)

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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

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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)

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)

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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

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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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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)

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

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)

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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)

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

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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

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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)

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)

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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

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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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

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

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

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

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

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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)

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

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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

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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

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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)

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

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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)

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)

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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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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

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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)

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)

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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)

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)

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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)

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 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)

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)

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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

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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)

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)

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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)

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)

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 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)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 6391

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)

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)

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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 6391

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)

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)

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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

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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

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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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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)

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)

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 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

8122019 BtecBS Part a- Strategic Fomulation (1)

httpslidepdfcomreaderfullbtecbs-part-a-strategic-fomulation-1 9191

18032014 JT -84 slides 91