Part3 Strategy

7/29/2019 Part3 Strategy

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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-1

Strategic ManagementMarket Dynamics


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ETOPEnvironmental Threat and Opportunity Profile

Factor Impact Importance Opportunity Threat

Regulatory 3 8 24

Competitive -2 7 -14

External Alliance 7 6 42Internal Alliance -6 5 -30

Entrepreneurial 4 5 20

Info Highway 5 4 20

Financial 7 4 28

Social 2 3 6

In this ETOP factors are tailored and ordered as to their importance

Regulatory - tremendous opportunity to push for deregulation, led by STPI.

They have had their lesson and learned well

Competitive - AT&T, Sprint

External Alliance - solid, mutually reinforcing, long-termInternal Alliance - source of friction and reduction of ability to react

Entrepreneurial - Stentor now much more entrepreneurial (all three elements)

Info Highway - mergers and acquisition for cable, cellular, infotainment

Financial - ability to increase leverage through debt

Social - universal access concept, downsizing, leanness all socially acceptable


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ETOP: Pros and Cons

ProsPros

Help to determine the keyfactors of threats and

opportunities

Good tool to qualify the factors

related to companys strategy

Can consider many factors for

each special case

ConsCons

It doesnt show theinteractions between factors

It cant reflect the dynamic

environment

Its a subjective analysis tool


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Porter Competitive Analysis

5 Forces Model of Competition

RIVALRYAMONG

COMPETINGSELLERS

RIVALRYAMONGCOMPETING

SELLERS

FIRMS IN OTHER

INDUSTRIES OFFERINGSUBSTITUTE PRODUCTS

FIRMS IN OTHER

INDUSTRIES OFFERINGSUBSTITUTE PRODUCTS

POTENTIALNEW ENTRANTS

POTENTIALNEW ENTRANTS

SUPPLIERSSUPPLIERS BUYERSBUYERS


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Porter Analysis

MarketMarket

SubstitutesSubstitutes

New EntrantsNew Entrants

SuppliersSuppliers CustomersCustomers

Horizontal Forces mature markets

Vertical Forces growth markets

Vertical and Horizontal competitive and changing markets


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Porter Competitive Analysis - Wal-Mart

Discount Retailing

Discount Retailing

NewE

ntrants


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Porter: NTI

AT&TNTI

AT&TNTI

Sat. Tech.Sat. Tech.

SiemensNEC

SiemensNEC

SuppliersSuppliers Baby BellsBaby Bells

Telephone or

Multimedia cost?

Low cost producer

Financial strength

Growth market

Price focus of customers - close to maturity

Strategic Factors: Flexibility, enhancement, uniqueness (product/service

combination), combine with GVA, new Porter needed?


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Porters Five Forces: Pros and Cons

ProsPros

Its a good tool to identify the clear

competitive environment and the

relationship for the five market forces It is an useful analysis model for the

new entrants and the existing

competitor inside the market

It helps the company designcompetitive strategies and make right

decisions

It surfaces the inverse relationship

between profit margin or returns andthe intensity of competition

It provides useful inputs for performing

other analysis

ConsCons

It often produces the same

recommendations for similar

organizations It assumes relatively static

market structures.

It provides a good framework

for analysis but does not reallyconsider issues around

implementing changes to

reposition for strategic

advantage.

It cant show how a company

performed relative to its

competitors


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Porter Competitive Analysis - Wal-Mart

Potential rate of growth in industry

Ease of entry of new firms into industry

Intensity of competition among firms

Degree of product suitability

Degree of dependency on compl. Or supporting prod & srvcs

Degree of bargaining power buyers and customers possessDegree of bargaining power suppliers and vendors possess

Degree of technological sophistication in industry

Rate of innovation in industry

General level of management capability

0 1 2 3 4 5 6 7 8


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1. Potential rate of growth of industry (in real terms)0-3% ___ 3-6% ___ 6-9 % ___ 9-12% ___ 12-15% ___ 15-18% ___ 18-21% ___ >21% ___

2. Ease of entry of new firms into industryNo barriers- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Virtually impossible to enter

3.Intensity of competition among firmsExtemely competitive- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Almost no competition

4. Degree of product substitutabilityMany substitutes available- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -No substitutes

5. Degree of dependency on complementary or supporting products and servicesHighly dependent-___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Virtually independent

Competitive Environment Analysis


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6. Degree of bargaining power buyers and customers possessBuyers dictate terms- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Selling firms dictate terms

7. Degree of bargaining power suppliers and vendors possessSuppliers dictate terms- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Buying firms dictate terms

8. Degree of technological sophistication in industryHigh-level technology- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Very low-level technology

9. Rate of innovation in industryRapid innovation- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Almost no innovation

10. General levels of management capabilityMany very capable managers- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Very few capable

managers

Competitive Environment Analysis


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Competitive Sustainability Analysis

Class Product

Class 1 - Slow Cycle Resources Marlboros

KSF: nurturing of protected market,

defending and building the brand

Class 2 - Standard Cycle Resources Lesser BrandsKSF: Economies of Scale

Market share/control

Building product loyalty

introducing new products to attack leaders brand

Class 3 - Fast Cycle Resources Financial Products

KSF: market timing and intelligence


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Strategic Map - Industry

Competitive Capability

HighLow

High

Low

Diversification

Sears

K-Mart

Price Club

Wal-Mart


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Strategic Map - IndustryAECL - CANDU

Competitive CapabilityHighLow

High

Low

Dive

rsification

General Electric

ABB$590M

Westinghouse$288M

AECL

$4,303MSiemens$1,792M

Framatome$984M


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Porters Diamond

Determinants of National Advantage

Factor

ConditionsDemand

Conditions

Firm, Strategy,

Structure, and

Rivalry

Related and

Supporting

IndustriesWal-Mart


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Industry Value Chain

PC Industry

Intel PC Makers Microsoft

Chips Hardware Software

Value captured by each player

value captured by neighbours influence competitive

dynamics of PC makers

Intel & Microsoft capture high % of value

PC makers are squeezed and are forced to compete on

volume because of low margins


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Economies of S

Scale (inputs,throughput, outputs)

Scope (production, technology, marketing, channels, core,

competencies/capabilities)

Strength (relative market share, branding power, shelf power)

Structure (market/product linkages,decision flow, value chain

management)

Speed (response time to market, product cycle time rate of

technology absorption)

Strategy (optimal/minimal changes, Strategic design criteria)

Synergy (association with clusters, joint ventures, strategic

alliances, coopetition)

Span (ability to focus on business: functional similarity,

geographic dispersion, functional complexity,need for direction, need for coordination, planning

demands, managerial help)

Sales (learning curve, experience curve)

State (organizational / product / production lifecycle)


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Economies of S

Organization

Market Phase

Market Phase

Market Pull

(focus)

Market Push (cost leader)

Market Test (differentiation)Intro

Competitive

Mature

Efficiency (throughput based)

Economy (input based, budgets)

Effectiveness(output based)

Entrepreneur

AdministrationMgr


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Key Success Factors - Giant Tiger

Niche market: Good value for $

Distribution channel cross docking

Good financial position

Flexible experienced buyers

Main street locations

Franchisee relationship


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Key Success Factors - Cross Keys

Key Success Factors Measures

Corporate credibility: Trade show recognition, speaking

invites, # of RFPs

Technological reputation: Quality/reliability/performance

Market Share: Revenue growth, # RFPs

Company morale: Turnover, employee interaction

Recruiting effectiveness: Average # of ongoing vacancies, #of qualified applicants per vacancy

Productivity: Revenue per employee

Sales effectiveness: Contracts signed per # RFPs

answeredMarketing effectiveness: Sales team approval, # of leads

Growth management: Turnover, recruiting, productivity,

employee morale


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Key Success Factors - Mitel

zDynamic product base

InnovationAddress segmentation

zExcellent service

zDistribution

Be on the short list of suppliers for major customersEach segment with appropriate channels

zEconomic value

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