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STRATEGIC MANAGEMENT
4
STRATEGIC MANAGEMENT
If a company is not best in world at a critical activity, it is sacrificing competitive advantage by performing that activity with its existing technique.
James Brian Quinn
Identify
Strategic Options for the Company
2.
What are the firms resource Strengths and Weaknesses and its market Opportunities and external Threats?
Geographic coverage.
Customer base, Segment Size & Makeup of the Target Market. Identify functional strategies to better understand firms strategy. Examine recent Strategic Moves, like Expansion, Price-cut, etc. Examine KPIs: vs. Objectives, vs. Industry Average and vs. Key Rivals.
Q1 Performance
Competitive Approach
Market Target
Q1 Performance
Geographic coverage.
Customer base, Segment Size & Makeup of the Target Market. Identify functional strategies to better understand firms strategy. Examine recent Strategic Moves, like Expansion, Price-cut, etc. Examine KPIs: vs. Objectives, vs. Industry Average and vs. Key Rivals.
Q1 Performance
Examine KPIs
Trend in sales and market share. Acquiring and/or retaining Customers. Trend in Profit Margins. Trend in Net Profits, ROI, and EVA. Overall financial strength and credit ranking.
Evaluate Resources
Tangible Resources: Relatively easy to identify, and include physical and financial assets used to create value for customers. Processes, Trade Secrets, etc.
Intangible Resources: Difficult for competitors (and the firm itself) to account for or imitate, typically embedded in unique routines and practices that have
Is a resource or capability Valuable Rare Difficult to Imitate No No No Yes Without Substance No No No Yes Implications for Competitiveness Competitive disadvantage Competitive parity Temporary competitive advantage Sustainable competitive advantage
No No Yes Yes
Q1 Performance
Balanced Scorecard. Financial, Internal, Customers and Learning & Growth Perspectives.
Q1 Performance
Q1 Performance
Financial Ratio
Semiconductors
Grocery Store
Skilled-Nursing Facilities
1.5 3.2
Total liabilities to net worth (%) 34.8 Collection period (days) 54.8
98.1
3.1
21.2
0.9
108.7
2.0
Q1 Performance
Sales ($ billions)
$ 0.8 20.2
27.4 32.7
$ 0.38 1.80
4.00 2.10
Q1 Performance
Balanced Scorecard
Customer Perspective. Time, Quality, Performance & Service, Cost.
Internal Business Perspective. Processes, Decisions, Actions, Coordination, Resource & Capabilities.
Growth & Learning Perspective. NPD, Greater Value for Customers, Increased Operating Efficiency.
Financial Perspective.
Profitability, Growth, Shareholders Value, Market Share, Reduced OpEx, High Asset Turnover.
Q1 Performance
Company Situation Analysis The Key Questions 1. What is the Performance of a firm with respect to its present strategy?
2. What are the firms resource Strengths and Weaknesses and its external
SWOT
A strength is something a firm does well or a characteristic that enhances its competitiveness - Competitive Assets.
A weakness is something a firm lacks, does poorly, or a condition placing it at a disadvantage - Competitive Liabilities.
Opportunities are the avenues for growth that match up with the Companys
financial and organizational resource capabilities.
Threats are the external factors that may hinder organizational growth.
Q2 SWOT
SWOT
Q2 SWOT
SWOT - Examples
Strengths: Valuable competencies or know-how. Valuable physical assets. Valuable human assets. Valuable organizational assets. Valuable intangible assets. Important competitive capabilities.
Weaknesses: Deficiencies in know-how or expertise or competencies. Lack of important physical, organizational, or intangible assets. Missing capabilities in key areas...
Q2 SWOT
Market Opportunities
Opportunities most relevant to a company are those offering.. ..best prospects for profitable long-term growth. ..potential for competitive advantage. ..good match with its financial and organizational resource capabilities.
A company is well-advised to pass on a particular market opportunity unless it has or can build the resource capabilities to capture it!
Q2 SWOT
External Threats
Emergence of cheaper/better technologies. Introduction of better products by rivals. Intensifying competitive pressures.
Onerous regulations.
Rise in interest rates. Potential of a hostile takeover.
Successful strategists aim at capturing a companys best growth opportunities and creating defenses against external threats to its competitive position and future performance!
Q2 SWOT
Competencies
A company competence is the product of organizational learning and experience and represents real proficiency in performing an internal activity.
Q2 SWOT
Competitive Advantage
Core and Distinctive Competencies Competitive Capabilities A competence deemed valuable & beneficial by the customer Competence A Valuable Company Resources or a Real Proficiency
Q2 SWOT
Competencies
Stem from skills, expertise, and experience usually representing an: Accumulation of learning over time, and Gradual buildup of real proficiency in performing an activity.
organizational ability.
A conscious effort to create intellectual capital.
Q2 SWOT
Competencies - Examples
Expertise in building networks and systems to enable e-commerce. Speeding new/next-generation products to market. Better After-Sale-Service capability. Skills in manufacturing a high quality product. Innovativeness in developing popular product features. Speed/agility in responding to new market trends. System to fill customer orders accurately and swiftly. Expertise in integrating multiple technologies to create families of new products.
Q2 SWOT
Successful strategists seek to capitalize on and leverage a companys resource strengths - its expertise, core competencies, and strongest competitive capabilities - by molding the strategy around the resource strengths!
Q2 SWOT
SWOTs focus on the external environment is too narrow it is only with respect to Companys close environment and direct impacts.
Q2 SWOT
and Threats?
3. Are firms Prices and Costs competitive?
Benchmarking.
Q3 Price/Cost
The higher a companys costs are above those of close rivals, the more competitively vulnerable it becomes!
Q3 Price/Cost
A companys value chain shows the linked set of activities, functions, and
business processes that it performs in the course of designing, producing, marketing, delivering, and supporting its product / service and thereby creating value for its customers.
A companys value chain consists of two types of activities Primary activities (where most of the value for customers is created) Support activities that are undertaken to aid the individuals ands groups engaged in doing the primary activities
Q3 Price/Cost
Operations
After-Sales Service
Profit Margin
Product R&D, Technology, Systems Development Human Resources Management General Administration Support Activities and Costs
Q3 Price/Cost
Associated with receiving, storing and distributing inputs to the product: Location of distribution facilities.
Associated with purchases of products and services by end users and the inducements used to get them to make purchases: Highly motivated and competent sales force. Innovative approaches to promotion and advertising. Selection of most appropriate distribution channels. Proper identification of customer segments and needs. Effective pricing strategies.
Associated with providing service to enhance or maintain the value of the product: Effective use of procedures to solicit customer feedback & to act on information. Quick response to customer needs and emergencies.
and events.
Ability to obtain low-cost funds for capital expenditures & working capital. Excellent relationships with diverse stakeholder groups. Ability to coordinate and integrate activities across the value chain. Highly visible to inculcate organizational culture, reputation, & values.
minimize absenteeism.
Reward and incentive programs to motivate all employees.
on one supplier.
Ability to make proper lease versus buy decisions.
Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners
Forward channel allies costs and margins are part of price paid by ultimate end-user and the activities performed
affect end-user
satisfaction
A companys cost competitiveness depends on how well it manages its extended value chain relative to how well competitors manage their chains
Q3 Price/Cost
Wages & Salaries Employee Benefits Supplies Travel Depreciation Other Fixed Charges Miscellaneous Operating Expenses
Evaluate Suppliers Process Purchase Orders Expedite Deliveries Expedite Internal Process Check Item Quality Check Deliveries Against Purchase Orders Resolve Problems Internal Administration
$640,150
Payment of suppliers.
Management of inventories. Training of employees. Processing of payrolls. Getting new products to market. Performance of quality control. Filling and shipping of customer orders.
Q3 Price/Cost
Objectives of Benchmarking
Determine whether a company is performing particular value chain activities efficiently by studying the practices and procedures used by other companies.
Understand the best practices in performing an activitylearn what is the best way to do a particular activity from those who have demonstrated they are best-inindustry or best-in-world.
Assess if companys costs of performing particular value chain activities are in line
with competitors.
Q3 Price/Cost
Q3 Price/Cost
Q3 Price/Cost
Q3 Price/Cost
Q3 Price/Cost
Sustainable competitive advantage can be created by: Managing value chain activities better than rivals and/or Developing distinctive value chain capabilities to serve customers!
Q3 Price/Cost
Organizational Structure Not Connected With The Value Chain. Apparently Designed For Assembly-line Operations. Use Of Info-tech & Feedback, Not Given Due Importance. Plan [Make & Deliver] Portion Missing. Too Linear & Sequential. Not Cyclic. Generic Fit For All.
Q3 Price/Cost
PLANNING
Innovation Opportunity Customer & Channel Insights-
Market Definition
BALANCING FACTORS
Demand Forecast
Market Readiness
Capacity
Inbound Logistics
Services
EXECUTION
Q3 Price/Cost
1. What is the Performance of a firm with respect to its present strategy? 2. What are the firms resource Strengths and Weaknesses and its external Opportunities and Threats? 3. Are firms Prices and Costs competitive? 4. How strong is firms competitive position relative to Rivals? 5. What Strategic Issues does firm face?
Indicates whether firm is at a competitive advantage / disadvantage against each rival. Identifies possible offensive attacks (pit company strengths against rivals weaknesses).
Q4 Position
Reputation/image
Manufacturing capability Technological skills Dealer network/distribution New product innovation
8
2 10 9 9
7
10 1 4 4
10
4 7 10 10
1
5 3 5 5
6
1 8 1 1
Financial resources
Relative cost position Customer service capability Overall strength rating
5
5 5 61
10
10 7 58
7
3 10 71
3
1 1 25
1
4 4 32
Q4 Position
ABC Co. 8/0.80 8/0.80 2/0.20 10/0.50 9/0.45 9/0.45 5/0.50 5/1.50 5/0.75
Rival 1 5/0.50 7/0.70 10/1.00 1/0.05 4/0.20 4/0.20 10/1.00 10/3.00 7/1.05
Rival 2 10/1.00 10/1.00 4/0.40 7/0.35 10/0.50 10/0.50 7/0.70 3/0.90 10/1.50
Rival 3 1/0.10 1/0.10 5/0.50 3/0.15 5/0.25 5/0.25 3/0.30 1/0.30 1/0.15
Rival 4 6/0.60 6/0.60 1/0.10 8/0.40 1/0.05 1/0.05 1/0.10 4/1.20 4/1.60
2. What are the firms resource Strengths and Weaknesses and its external Opportunities and Threats?
Requires thinking strategically about: Pluses and minuses in the industry and competitive situation. Companys resource strengths and weaknesses and attractiveness of its competitive position.
A good strategy must address what to do about each and every strategic issue!
Q5 Issues
Does the company need new or different resource strengths and competitive capabilities?
Does present strategy adequately protect against external threats & resource deficiencies?
Q5 Issues
Whether to .?
Should we .?
Issues on the the worry list raise questions about: What actions need to be considered. What to think about doing.
Q5 Issues