Selection of Benchmark Business Models

8/8/2019 Selection of Benchmark Business Models

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Markets and Structure of Flow

Governmentmarkets

Middlemenmarkets

Resourcemarkets

Manufacturer markets

Services, money

Resources

Money

Taxes, goods

Goods and services

Services,money

Taxes,goods

Money

Consumer marketsServices

Resources

Money

Taxes

Money

Goods and services

Taxes,goods

Services,money


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A Companys Macroenvironment

COMPANY

Substitute

Buyers

New Entrants

Rival Firms

Suppliers

IMMEDIATE INDUSTRY &COMPETITVE ENVIRONMENT

MACROENVIRONMENT

The Economy at large

S o c i a l V a l u e s a n d L i f e s t y l e s P o

p u l a t

i o n d e

m o g r a p

h i c s

T e c h n

o l o g y

L e g i s l a t i o n a n d r e g u l a t i o n s


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Break-even Analysis

TotalRevenue

Total Costs

FixedExpenses*

* Fixed Expenses = Marketing Expenses and Other Direct

Expenses

$Millions

15

30

35

20

10

25

5

050 150100

Break-Even Volume(90,000)

200

Units Sold (000)

Profit Loss


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Demand and Supply

Price

Quantity0

G

B

E

D

F

S

A

D

S


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Elasticity

Demand is elastic and expenditure increaseswhen price falls from P1 to P2

(-)

(+)Price

P1

P2

0 Quantity

Demand is inelastic and expenditure increaseswhen price falls from P1 to P2

(+)

(-)

Price

P2P1

0 Quantity

e = 0

Quantity

Price e = 0

e = -

(totalinelasticdemand)

(total elasticdemand)

Quantity

Price

e = - e < - 1

e = - 1

e > - 1


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The Product Life Cycle

Salesoverprofits

Stages over Time

Introduction Growth Maturiy Shake-out Decline

Sales

Profits


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The Life-Cycle Portfolio Matrix

C

A

Strong Average Weak

Development

Growth

Competitiveshakeout

Maturity

Decline

Saturation

THE BUSINESS UNITS COMPETITIVEPOSITION

THE INDUSTRYS STAGEIN THE EVOLUTIONARY

LIFE CYCLEE

F

D

B

H

G


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The Product-Positioning Map

High price

Low quality

High quality

Low price

C

D

AE

B


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The Four Ps of McCarthy

Product

Place Promotion

Price

Environment

Environment

E n

v i ro

n m

e n t E

n v i r o n m e n t


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Efficiency vs. Effectiveness

ThriveEfficient

Die quicklySurvive

Die slowly

STRATEGIC MANAGEMENT

OPERATIONALMANAGEMENT

Inefficient

Effective Ineffective

1

43

2


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SWOT Analysis

Strengths

Opportunities Threats

Weaknesses


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The Generic Value Chain

Inboundlogistics

Outboundlogistics

Operations Marketingand sales

Service

Primary Activities

Procurement

Technology development

Human resources management

Firm infrastructure

M a r g i n

M a r g i n


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The Ansoff Matrix

Existing

New

Existing New

New product

development

Marketdevelopment

Market penetration

Diversification

PRODUCTS AND/OR SERVICES

MARKETS


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BCGs Growth-Share Matrix

High

Low

LowHigh

MARKETGROWTH

RATE

RELATIVE MARKET SHARE

Star

Cash Cow Dog

QuestionMark


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McKinsey 7-S Framework

SuperordinateGoals

Structure

Staff

Strategy Systems

StyleSkills


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Core Competencies

Banner Brand

Business

Units

CoreProducts(Platforms)

CoreCompetencies


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The General Electric Business Screen

Low

High

Medium

Strong Average Weak

COMPETITIVE POSITION

INDUSTRYATTRACITVENESS


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GE / McKinsey Multifactor Portfolio Matrix

INDUSTRY ATTRACTIVENESS

BUSINESSSTRENGTH

InvestManage

Selectivelyfor Earnings

Invest

Invest

ManageSelectively

for Earnings

ManageSelectively

for Earnings

Harvest or Divest

Harvest or Divest

Harvest or Divest


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Very low Moderate Very high

Very low

Moderate

Very high

MARKETRISK

TECHNOLOGY RISK

Market and Technology Risk Bubble Diagram


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Porters Five Forces

Potential Entrants

Industrycompetitors

Rivalry amongexisting firms

Substitutes

BuyersSuppliers

Threat of substitute productsor services

Bargaining power of suppliers

Bargaining power of buyers

Threat of new entrants


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The Generic Strategies

Cost Leadership Differentiation

Cost Focus Differentiation Focus

BroadTarget

Narrow

Target

Lower Cost Differentiation

COMPETITIVE ADVANTAGE

COMPETITIVESCOPE


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Leavitts Diamond

Task

Technology

PeopleStructure


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Maslows Hierarchy of Human Needs

Esteem Needs(self-esteem, recognition, status)

Self-Actualization Needs(self-development and

realization)

Social Needs(sense of belonging, love)

Safety Needs(security, protection)

Physiological Needs(hunger, thirst)


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Managerial Grid

1 2 3 4 5 6 7 8 9

1

2

3

4

5

6

7

8

9

concern for production

concernforpeople

Country Club Management (1,9)

Production is incidentalto lack of conflict andgood fellowship

Team management (9,9)

Production is fromintegration of task and human requirements

Dampened Pendulum (5,5)

(Middle of the road.)Push for production butdont go all out. Give some

but not all all: be fair but firm

Task Management (9,1)

Men are a commodity just as machines.A managers responsibilityis to plan, direct andcontrol the work of thosesubordinate to him

Impoverished Management (1,1)

Effective production isunobtainable becaus people arelazy, apathetic and indifferent.Sound and mature relationshipsare difficult to achieve because,(human nature being what it is)conflict is inevitable


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The Business Process Re-engineeringApproach

Function 1 Function 2 Function 3 Function 4

Micro operations

Customer needs fulfilled

Business processes

Customer needs

Business pro

Customer

Customer nee

Micro operat

Activity 1 Activity 2 Activity 3 Activity 4


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Total Quality Management

Whole operation involved Quality srategy Teamwork Staff empowerment Involves customers and suppliers

Quality systems Quality costing Problem solving Quality planning

Statistical methods Process performance Quality standards

Error detection rectification

Inspection

Total quality management

Quality control

Quality assurance


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Supply Chain Management

TheOperation

Second-tier suppliers

First-tier suppliers

First-tier customers

Second-tier customers

Supply side Demand side

Purchasing and supplymanagement

Physical distributionmanagement

Logistics

Materials management

Supply chain management


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Du Pont SchemeReturn on equity

ROE =Earnings after tax

Owners equity

Financial leverage multiplier Tax effectsReturn on invested capital

ROIC =Earnings before interest and tax

Invested capital

Operating profit margin

Earnings before interest and taxSales

Capital turnover

SalesInvested capital

Financial structure ratio

Invested capitalOwners equity

Financial cost ratio

Earnings before taxEarnings before interest and tax

Tax effect ratio

Earnings after taxEarnings before tax

Sales

Operating costs

Invested capital Owners equity Cost of debt Tax rate

Cash

Working Capitalrequirement

Fixed assets


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Valleyof Death

EnterpriseCash Flow

EnterpriseFinancing

TimeBreak-even

point

Emerging Growth

FFF & Angels

Venture

CapitalistInvestment Banks &

Banks

Seed Capital& Early Stage

EarlyGrowth

Later Growth

PublicMarket

InitialPublic

Offering

Mezzanine

1st

2nd

3rd

Financing Life Cycle


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Selection of Benchmark Business Models