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Colin BoydStrategic Analysis
Defining a Firm’s Product-Market Position
Colin BoydProfessor of Management
University of Saskatchewan
Colin BoydStrategic Analysis
“Would you tell me, please, which way I ought to go from
here?”
“That depends a good deal on where you want to get to,”
said the Cat.
“I don’t much care where—” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“…as long as I get somewhere,” Alice added as an
explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk
long enough.”
Alice in Wonderland
What relevance does this have for organizations, and for organizational decision-making?
Colin BoydStrategic Analysis
“Who are you,” said the caterpillar.
Alice replied, rather shyly, “I—I hardly know, Sir, just at present—at least I know who I was when I got up this morning, but I think I must have changed several times since then.”
But you cannot specify a desired destination unless you first of all know your starting point.
I wonder if I've been changed in the night? Let me think. Was I the same when I got up this morning? I almost think I can remember feeling a little different. But if I'm not the same, the next question is 'Who in the world am I?' Ah, that's the great puzzle!
Colin BoydStrategic Analysis
Future Strategy Comes from UnderstandingHow a Firm has Historically Defined Itself
How can you determine where to move to unless you know where you are before the start of the move?
Colin BoydStrategic Analysis
How has the firm historically defined
its product-market position in terms of:• horizontal
integration?• vertical integration?• geographical
coverage?
What is the current position of the firm?
Colin BoydStrategic Analysis
A Sideways Slide!
we sell fruit juice
we sell cranberries
we supply Thanksgiving food
we sell berries
we sell cranberry stuff
cranberries
add a product to thehorizontal shelf and
change the definitionof the business!
cranberries turkeys
cranberries blueberries
cranberries cranberry juice
cranberry juice orange juice
cranberry juice cranberry candies we sell candies
Colin BoydStrategic Analysis
horizontal integrationhow does the business definition change
as we add new products to the shelf?
Bread Milk Cigarettes Confectionery
Magazines Arcade Games
Slurpies Coffee & Danish Hot Dogs Hamburgers
Western Union Money Services
Gasoline
Videotape Rentals
Big Gulps
ATM
Motor Oil Washer Fluid
Colin BoydStrategic Analysis
The dilemma of horizontal integrationWhich business definition is the one which should
define our future strategic direction? Can we follow more than one path?
Bread Milk Cigarettes Confectionery
= Entertainment
Slurpies
Magazines
Western Union
Gasoline
(= no coherent definition)
= Auto supplies & services
= Banking
= Fast Food
Colin BoydStrategic Analysis
Men’s suits
Shirts
Ties
Shoes
Socks
Belts
Horizontal integration as a natural market grouping
What else can I sellyou right now thatwill transfer moremoney from yourwallet into my till?
Colin BoydStrategic Analysis
Horizontal integration as a natural market grouping
Ocean Spray Cranberry JuiceOcean Spray Orange JuiceOcean Spray Cranberry Candies
30 Polo Ralph Lauren Stores, 9 Polo Concept Stores, 54 Club Monaco Stores, 130 Outlet Stores (Horizontal at retail level)
Men's Clothing, Sportswear, Jeans, Underwear
Women's Clothing, Swimwear, Jeans
Children's Clothing
Accessories: Luggage and Handbags, Leathergoods, Footwear, Gloves, Scarves, Eyewear, Jewelry, Hosiery, Fragrances
Ralph Lauren Home, Bedding Products and Accessories, Bath Products., Furniture, Fabric and Wallpaper, Table Linens, Flatware, Paint, Broadloom Carpets, Area Rugs
Ralph Lauren
Colin BoydStrategic Analysis
Men’s suits
Shirts
Ties
Shoes
Socks
Belts
Horizontal integration as a natural manufacturing grouping
What else can I make that uses
my current manufacturing skills?
WalletsReins Holsters Bags
Colin BoydStrategic Analysis
Colin BoydStrategic Analysis
• ICE CREAM • SODA • SUNSCREEN• INTERNET ACCESS?
Does your next product conform to your business definition?
Colin BoydStrategic Analysis
Colin BoydStrategic Analysis
Colin BoydStrategic Analysis
Colin BoydStrategic Analysis
Colin BoydStrategic Analysis
Colin BoydStrategic Analysis
But if your product range becomes too wide, you risk losing your focus and your
original identity.
A competitor with a tighter focus may
emerge, forcing you to retreat back to
your core product.
Colin BoydStrategic Analysis
Vertical Integration:Understanding the Supply Chain
Raw Materialstransport
raw material processing
transport
manufacturing
transport
warehousing
transportEnd Customer
Where do you want to be in the
supply chain?
Do you want to be involved in more than one stage in the supply chain?
The Supply Chain
Colin BoydStrategic Analysis
BackwardIntegration
Raw Materials
End Customer
Do you want to move positions
within the supply chain?
Sliding Backwards and Forwards:Vertical Integration in the Oil Industry
• Exploration• Drilling• Production Platforms• Transport• Refinery• Pipeline• Distribution Depot• Retail Outlet• Auto Servicing
ForwardIntegration
Back towards the source of raw materials
Forward towards the
end consumer
Colin BoydStrategic Analysis
Canadian operating facilities include:
Four natural gas plants in AlbertaOffshore natural gas production facilities in Nova Scotia (Sable - joint venture)Heavy oil production facilities in AlbertaOil sands mine and extraction plant in Northern Alberta (Athabasca Oil Sands Project – joint venture)Oil sands upgrader (Athabasca Oil Sands Project – joint venture)Three refineries, each in Alberta, Ontario and Quebec respectivelyOne chemical plant in AlbertaTwo lubricant facilities, each in Alberta and Ontario respectivelyOver 1,600 branded retail stations
About Shell
Colin BoydStrategic Analysis
VERTICAL
INTEGRATION
SHELL
7-ELEVEN
Arriving at the same place from totally
different directions!
Which firm makes the best burger?
Which firm would be a better banker?
H O R I Z O N T A L I T E G R A T I ON
Colin BoydStrategic Analysis
Colin BoydStrategic Analysis
Colin BoydStrategic Analysis
A Menswear Store in Saskatoon, Sask.What Next? What Strategy to Adopt?
Horizontal Integration
Vertical Integration
• Add boys' clothing• Add women's clothing• Add sports equipment
• Manufacture suits• Dry cleaning business
Geographical Expansion
• A second Saskatoon store• A store in Regina• A store in Edmonton
Colin BoydStrategic Analysis
PRODUCTPresent New
CUSTOMER
New
Present MarketPenetration
MarketDevelopment
ProductDevelopment
Diversification
THE ANSOFF MATRIX
Colin BoydStrategic Analysis
Why go for unrelated diversification?
• Risk of market innovation or consumer fickleness• Risk of production innovation• Risk of technological change• Risk of obsolescence• Dependence on one economic cycle• Dangerous to put all one’s eggs in one basket
It does not use any of your core skills!
Sticking to one product/market area =
Colin BoydStrategic Analysis
Related and Unrelated DiversificationMarket-relatedDiversification
Production-relatedDiversification
customers youknow very well
customers youknow less about
customers youdon’t know at all
production you know very well
production you know less about
production you are ignorant
about
relateddiversification
concentricdiversification
unrelateddiversification
Core Setof Skills
Colin BoydStrategic Analysis
Decision Making at the Strategic Level
…involves questions such as….
• Are we in the right kind of business?• Should we stay the same, or change in some way?• Should we become smaller, or bigger?• On which dimension(s) should we change…• ….geographical scope?• ….breadth of products offered?• ….extent of vertical integration?• ….specialization versus diversification?