3 - Corporate Strategy 2012

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LEARN. PERFORM. GROW.

Corporate StrategyMaster Degree

The Faculty of International Business and Economics,

ASE Bucharest

3. The Strategic Position (I)


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Layers of business environment

The macro-environment

Industry (or sector)

Competitors

The Organization


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Analising strategic position

a. External analysis> environment

b. Internal analysis> strategic capability

Expectations

& Purposes


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Introduction

Analyzing environment -> show how managers can make sense of

an uncertain world around their organization

Challanges of analysis:

To make sense of the environment diversity

Problem of complexity(many of the separate issues in the

business environment are interconnected)

Speed of change


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1. General analysis

2. The Macro - environment analysis

3. Industries and sectors analysis

4. Market Analysis

AGENDA for TODAY

3.The Strategic Position (I)

The Environment


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1. General analysis



4. Market Analysis

AGENDA for TODAY


The Environment


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1. General analysis

Techniques general approach

Future evolution: quick or slow?

Future is cyclic or no cyclic?

Future is predictable or unpredictable? The influencing factors over the organization are

complex or simple?

Results

general strategic conclus ions : The environment is too turbulent in order to develop

efficient predictabilities?

Which are the opportunities and threats for theorganization?


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1. Genera l ana lys is



4. Market Analysis

AGENDA for TODAY


The Environment


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Techniques:

2.1 PESTEL Analysis

2.2 Building Scenarios

2.3 Porters Diamond

Results:

Identifying key factors

Predictability (if possible) Understanding the connections among events

The determinants of national advantage


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2.1 PESTEL Analysis

The

organization

Political

Economic

Socio-cultural

Technological

Environmental

Legal


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Political factors

Government stability

Taxation policy

Foreign trade regulations

Social welfare policies


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Economic factors

Business cycles

GNP trends

Interest rates

Money supply

Inflation

Unemployment

Disposable income


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Socio-cultural factors

Population demographics

Income distribution

Social mobility

Lifestyle changes

Attitudes to work and leisure

Consumerism

Levels of education


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Technological factors

Government spending on research

Government and industry focus on technological effort

New discoveries / developments

Speed of technology transfer


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Environmental factors

Environmental protection laws

Waste disposal

Energy consumption


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Legal factors

Competition law

Employment law

Health and safety

Product safety


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2.2 Building Scenarios

Detailed and plausible views of how the business environment of an organization

might develop in the future based on groupings of key environmental influences

and drivers of change about which there is a high level on uncertainty

Uncertainty

Low High

High

Potential

impact

?


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2.3 Porters Diamond

There are inherent reasons:

why some nations are more competitive than others?

why some industries within nations are more competitive than

others?

The national home base of an organization:

plays an important role in creating advantage on a global scale

provides factors which organizations are able to build on and

extend to provide such advantage


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Porters Diamond the determinants of national advantage

Firm strategy,

structure and

rivalry

Demand

conditions

Factors

conditions

Related and

supporting

industries


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Porters Diamond the determinants of national advantage

Specific factor conditions help explain the basis of advantage on a national level

-> provide initial advantages that are subsequently built upon a yield more

advantaged factors of competition

Home demand conditions

provide the basis upon which the characteristics ofthe advantage of an organization are shaped

One successful industry may lead to advantage in related and supporting

industries

The characteristics offirm strategy,industrystructure and rivalryin different

countries also help explain bases of advantage.


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2. The Macro - env i ronment ana lys is


4. Market Analysis

AGENDA for TODAY

3. The Strategic Position (I)

The Environment


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Techniques:

3.1 The 5 force framework - PORTER

Results:

The description of the competitive market forces



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3.1 The 5 force framework - Porter

Competitive

rivalrySuppliers Buyers

Potential

entrants

Substitutes

power power

Bargaining Bargaining

Threat of

Threat of substitutes

entry


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a. The threat of entry:

Depending on which extent there are barriers of entry

Barriers of entry factors that need to be overcome by new entrants if

they are to compete successfully

Typical barriers are as follows:

Economies of scale

The capital requirement of entry

Access to supply or distribution channels

Customer or supplier loyalty Experience

Expected retaliation

Legislation or government action

Differentiation


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b. The threat of substitutes

Substitution reduces demand for a particular class of products, as

customer switches to other alternatives (if a substitute provides a higher

perceived benefit or value)

Substitution may take different forms:

Product-for-product substitution & complementors organizations (with

products more competitive)

Substitution of need by a new product or service, rendering an existing

product or service redundant

Generic product when products or services compete for disposable income


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c. The power of buyers

Constraints the strategic freedom of an organization and influences the

margins

Together with the power of suppliers represent the value network within

which an organization is operating

Buyer power is likely to be high when:

> There is a concentration of buyers

> The cost of switching a supplier is low or involves little risk

> There is a threat of the supplier being acquired by the buyer and / or thebuyer setting up in competition with the supplier (backward integration)


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d. The power of suppliers

Constraints the strategic freedom of an organization and influences the

margins

Together with the power of buyers represent the value network within

which an organization is operating

Supplier power is likely to be high when:

There is a concentration of suppliers

The switching costs from one supplier to another are high

There is the possibility of the supplier competing directly with their buyers(forward integration)


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e. Competitive rivalry

Competitive rivals organizations with similar products and services

aimed at the same customer group

Factors that affect the degree of competitive rivalry in an industry or

sector are:

> The extend to which competitors are in balance

> Industry growth rates may affect rivalry

> High fixed costs in an industry (perhaps through capital intensity, may results

in price wars and low margins)

> High exit barriers to an industry (persistence of excess capacity)

> Differentiation (e.g. in FMCG industry, where many products or services are

undifferentiated)


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The 5 force framework - Porter

a.The threat of entry

b.The threat of substitutes

c.The power of buyers

d.The power of suppliers

e.Competitive rivalry


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2. The Macro - env i ronment ana lys is

3. Indust r ies and sectors ana lys is

4. Market Analysis

AGENDA for TODAY3. The Strategic Position (I)

The Environment


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Techniques:

4.1 SWOT Analysis (Opportunities & Threats);

4.2 Competitors Analysis (critical success factors; the

growth share matrix);4.3 Customers Analysis (customer matrix, market studies &segmentation)

Results

Market Opportunities & Threats

Competitors profile

The analysis of the relative market position

Strategy towards the existing & potential clients

4. Market Analysis


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4.1 SWOT Analysis

Opportunities Threats

W...............S.................


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4.2 Competitors Analysis- Critical success factors

Understanding what customers value: which are the critical

succes factors?

What differentiate competitors within a specific market?

Critical success factors (CSFs) those product features that

are particularly valued by a group of customers and,

therefore, where organization must excel to outperform

competition


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A strategy canvas perceived value by customers-example for the electrical engineering industry

Reputation After-sales service Delivery reliabilityTesting Technical quality

MOST IMPORTANT LESS IMPORTANT

0.25

0.5

0.75

1.0

RATING

Company A

Company B

Company C


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Competitors Analysis - The growth share (or BCG) matrix

Market

growth

Market shareHigh Low

Low

Stars Questionmarks

Cash

CowsDogs


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Competitors Analysis main criteria of differentiation

Objectives

Resources (different types: financial, HR, operational, etc)

Performance history

Existing products and services

Existing strategies


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4.3 Customers Analysis main phases

1.Identify clients and markets

2.Market segmentation and strategic effects

3.The importance and role of the offered services to the clients

& their quality


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Customers Analysis - market studies & segmentation

Type of factor B2C - Consumer marketsB2B - Industrial /

organizational markets

Characteristics

of people/

organizations

Purchase / use

situation

Users needs

and preferences

for product

characteristics

Age, sex, race

Income

Family size

Life-cycle stage Location

Lifestyle

Industry

Location

Size

Technology

Profitability

Management

Application & volume

Importance of purchase

Frequency of purchase

Purchasing procedure

Choice criteria

Distribution channel

Size of purchase

Brand loyalty

Purpose of use

Purchasing behavior

Importance of purchase

Choice criteria

Performance requirements

Assistance from suppliers

Brand preferences

Desired features

Quality

Service requirements

Product similarity

Price preference

Brand preferences

Desired features

Quality


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Whatwewant?

What the customers want?

Whatwewant?

Se

Reao

Relationale

Transactional

SALES

Consultative

SALES

Customers Analysis - customer matrix (applied in sales)

(sourc e: AchieveGlobal, Inc)


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Who are the customers appreciating the products/services we sell

SUGESTIONS Check your resources Be prepared tonegotiate Pay attention to yourprofitabilitySUGESTIONSDont invest time orresources for theseclients

SUGESTIONS Invest resources forbuilding a relationship Build a long termdevelopment plan foreach client

SUGESTIONS Prioritize your clients Invest time andresources for closing thesales as sooner aspossibleV

uosaereeeave

Value for customersSmall

Big

Big

(sour ce: AchieveGlobal, Inc)


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For more information:

Cosmin Jolde

cosmin. jo ldes@achieveglobal . ro

Thank you!


3 - Corporate Strategy 2012

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