Contenido unidad 5 estrategia y ventaja competitiva by jirodriguez

Professor: Juan Rodríguez (PG IBFS).

2013.

Business and Strategy

Juan Ignacio Rodriguez

PG International Banking and Financial Services

¿What is Entrepreneurship?

• Not just small business management • Not just startups • Not just for-profit firms

Is the act of creating a new and innovative enterprise

“The pursuit of opportunity beyond the resources you currently control” – Howard Stevenson, Harvard Business School-



Some concepts underlying entrepreneurship

Economic theory is concerned with two major questions about

society:

1) ¿How does society create new wealth?

2) ¿How does a Society distribute wealth among its members?



The notion of creative destruction:

The economist Joseph Schumpeter popularized and used the term to describe the

process of transformation that accompanies radical innovation.

In Schumpeter's vision of capitalism, innovative entry by entrepreneurs (Empresarios-

emprendedores) was the force that sustained long-term economic growth, even as it

destroyed the value of established companies that enjoyed some degree of monopoly

power.

By this way, entrepreneurs are individuals who grasp opportunities with the aim to

maximize profits and they did this by unnoticed profit opportunities by being alert to

them.



There are numerous types of innovation-generating creative destruction in an

industry:

• New markets

• New sort of products

• New sort of equipment

• New sources of raw materials

• New methods of management

• New methods of inventory management

• New methods of transportation

• New methods of communication

• New methods of advertising and marketing

• New financial instruments



Sources of value in Business Physical: 1) Land 2) Buildings 3) Equipment 4) Inventories 5) Technology

Organization

External Stakeholders

1) Creditors 2) Strategic

Partners 3) Suppliers

Finance 1) Cash 2) Debt Portfolio 3) Financing 4) Investments 5) Capital

Skills

Leadership Brand Management

Strategies Knowledge

Values Innovation

Systems Process

Internal stake

holders 1)Employees 2) Shareholders 3) BondHolders 4)Managers 5)Board of directors



According to Frank H. Knight (1967) and Peter Drucker (1970)

entrepreneurship is about taking risk.

• The behavior of the entrepreneur reflects a kind of person willing to put his or her

career and financial security on the line and take risks in the name of an idea,

spending much time as well as capital on an uncertain venture. Knight classified

three types of uncertainty.

•Risk, which is measurable statistically

•Ambiguity, risk which is hard to measure statistically

•True Uncertainty or Knightian Uncertainty, which is impossible to estimate or

predict statistically .



A solution to this ambiguity is proposed in; "How to Measure Anything: Finding the

Value of Intangibles in Business“, by Doug Hubbard:

Uncertainty: The lack of complete certainty, that is, the existence of more than one

possibility. The "true" outcome/state/result/value is not known.

Measurement of uncertainty: A set of probabilities assigned to a set of possibilities.

Example: "There is a 60% chance this market will double in five years"

Risk: A state of uncertainty where some of the possibilities involve a loss,

catastrophe, or other undesirable outcome.



Some notes about risk:

An entrepreneur would typically start by asking the following questions:

• Do you understand the market that the product will address and the customer needs that

it will meet?

• Do you think it is a better product than competitor products?

• Do you have a credible team with many of the skills you will need to start your new

venture?

• Do you have any protection for your new idea – copyright, patent, registered design, an

so on?



Building a successful Venture According to Shuman Ghosemajumder- Stanford University Management

Science & Engineering

The success formula is equal to:

Success = Team + Resources + Strategy

So that everyone should be: 1) Team player, 2) hardworking, 3) Curious

4) Flexible and good at listening

Need have: 1) personal achievers, 2)sales people, 3) creative people, 4) managers

and so on



Key Phrase: added value, sustainable profitability,

what causes industry profitability

According to Michael Porter, it is what is going to

make a particular organization different in other

words, it has to be with the creation of a unique sort

of value aimed to the customer.

Find a different place, different

market , different way to make

things with added value by taking

into account variables such as:

setting up the best practices

(direct distribution, strict cost

control, straight forward client

communication), product features,

price, customer service, place,

warranty an so on

Strategic positions can be based on customers`

needs, customer accessibility, or even the variety of

a company`s products or services



Action Forces - The external environment

Industry Environment

*Threat of new entrants *Power of suppliers

*Power of Buyers *Product Substitutes *Intensity of rivalry

Economic

Demographic

Political/Legal

Technological

Global

Socio Cultural



The General environment: Segments and elements

Demographic segment: Population Size, Age Structure, Geographic distribution, ethnic mix, income distribution

Economic Segment: Inflation rates, interest rates, trade deficits and surpluses, budget deficit and surpluses, personal savings rate, Gross domestic product

Political and legal segment: Antitrust laws, taxation laws, deregulation philosophies, Labour laws, educational philosophies and policies

Socio cultural segment: Women in the workforce, workforce diversity, attitudes about the quality of work life, concerns about environment, shifts in work and

career preferences

Technological segment: Product innovations, Application of knowledge, New communication technologies, Research and development expenditures.

Global segment: Critical global markets, Important political events, newly industrialised countries,.



External Environmental analysis.

An important objective of studying the general environment is identifying

opportunities and threats.

An opportunity is a condition

in the general environment

that will help a company to

achieve its strategic

competitiveness.

A threat is a condition in the general environment that may diminish a company `s efforts

to achieve strategic competitiveness.



Porter’s Five Forces

Model of Competition

Bargaining power of suppliers

Bargaining power of

buyers

Threat of substitute products

Rivalry among

competing firms

Threat of new entrants



Threat of New Entrants

Barriers to entry :

Government Policy

Economies of Scale

Product Differentiation

Capital Requirements

Switching Costs

Access to Distribution Channels

Cost Disadvantages Independent of Scale



Threat of forward integration in other words it will include the control of direct distribution.

Suppliers’ products have few substitutes

Buyer is not an important customer to supplier

Suppliers’ product is an important input to buyers’ product

Suppliers’ products are differentiated

Suppliers’ products have high switching costs

Suppliers are likely to be powerful if:

Bargaining Power of Suppliers



Bargaining power of buyers

Customers are powerful when:

•They purchase a large portion of an industry`s total outputs.

•They could switch to another product at little, if any, cost.

•The industry's products are undifferentiated or standardised

•Buyer has full information.

•Ability to backward integration (To acquired suppliers)



Threat of Substitute Products

Products with

similar function

limit the prices

firms can charge

In Porter's model, substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product's demand is affected by the price

change of a substitute product.



Rivalry Among Existing Competitors

The intensity of rivalry is influenced by the following

industry characteristics:

• A larger number of firms increases rivalry because

more firms must compete for the same customers

and resources.

• Slow market growth causes firms to fight for market

share.

• Low switching costs increases rivalry. When a

customer can freely switch from one product to

another there is a greater struggle to capture

customers.



Kraft Foods lnc.(Company´s

Description)

Kraft Foods Inc. (Kraft Foods); manufactures and markets packaged food products, including snacks, beverages, cheese and various packaged grocery products. The Company operates three segments: Kraft Foods North America, Kraft Foods Europe and Kraft Foods Developing Markets. At December 31, 2009, the Company had operations in more than 70 countries and made the products at 159 manufacturing and processing facilities globally. At December 31, 2009, the Company’s portfolio included nine brands, including Kraft cheeses, dinners and dressings; Oscar Mayer meats; Philadelphia cream cheese; Maxwell House and Jacobs coffee; Nabisco cookies and crackers and its Oreo cookie brand; Milka chocolates; and LU biscuits. On August 4, 2008, Kraft Foods completed the split-off of the Post cereals business into Ralcorp Holdings, Inc. In February 2010, the Company announced that it has acquired the control of Cadbury plc.



Kraft Foods`stock

5 year`s record

Source: Google Finance

A positive trend according to the financials records.

On the other hand Beta has to be positive

Nasdaq Index

Kraft Foods Index

There is a good gap between stock`s price in 52 week.



Value Creation for Stock Holders The combination of Kraft Foods and Cadbury creates a global powerhouse

in snacks, confectionery and quick meals.*

1. The company is the world’s second largest food company with annual revenues of $48 billion.

2. Millions of times a day, in more than 160 countries, consumers reach for their favorite Kraft Foods

brands. On the other hand, in the U.S., KF´s products are present in more than 99 percent of

households.

3. The company proudly market 11 brands with revenues exceeding $1 billion, including: Kraft, Jacobs,

LU, Maxwell House, Cadbury, Trident, Milka, Nabisco and its Oreo brand, Philadelphia, and Oscar

Mayer. Approximately 70 brands have revenues greater than $100 million. More than 40 of our

brands are at least 100 years old.

4. More than 80 percent of the company revenues come from products that hold the No. 1 share

position in their respective categories.

5. The company is making the difference by fighting hunger and supporting healthy lifestyles. Over the

past 25 years, KFT have donated nearly a billion dollars in cash and food.

6. Finally, KFT is a member of the Dow Jones Industrial Average and Standard & Poor’s 500.



Bibliografía

HITT, IRELAND and HOSKISSON. Strategic Management. International

Student Edition. THOMPSON. 6th Edition. 2005.

MASTFERN, RICART and VILA. Dirección Estratégica. Biblioteca IESE de

Gestión Empresarial. Folio. 2000

RESTREPO, Luis. Interpretando a Porter. Colección de textos de

Administración y Negocios. Facultad de Administración. Editorial Universidad

del Rosario. 2004.



Cibergrafìa

Análisis fuerzas competitivas Michael Porter:

http://youtu.be/oc-oNMLKhzI

HSM inspiring Ideas:

http://www.youtube.com/watch?v=0E0e6NqcT0M&feature=youtu.be

Google Finance:

https://www.google.com/finance?q=NASDAQ%3AKRFT&ei=UsM8UcCOEK

eElAOTpQE






http://www.youtube.com/watch?v=0E0e6NqcT0M&feature=youtu.be



Documents

Contenido unidad 5 estrategia y ventaja competitiva by jirodriguez