business management a.y. 2010 -2011 prof. francesco polesewebuser.unicas.it/madi/polese/uploads/bm -...

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University of Cassino

Faculty of Economy

BUSINESS MANAGEMENT

A.Y. 2010 -2011Prof. Francesco Polese

Business Management and Strategies

22

Strategies

Intruments and models

Value creation

Value constellation (Normann-Ramirez)

Value system (Porter)

Value chain (Porter)

Value networks

Business Plan Balanced Scorecard BCG Matrix IndexASA (Abell)

Controll Strategic decisions Analysis

B.E.P.5 strenght (Porter)

Business management and strategies

Strategic planning Politics Competitive advantage

Principles Objectives Competitive ConceptGrowth Fonts Mnagement

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Strategies

Strategic planning Politics Competitive advantage

Principles Objectives Competitive ConceptGrowth Fonts Mnagement

Every business is a structure composed by manyresources, organized in various parts in order toaccomplish, through value creation processes,finalities and objectives cohetrent to its own scopeas it results from business vision.

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In defining itsmission the enterprise defines:• Its own social role;• The system boundaries;• The ethics principles of its behaviour (mission).

Premise

Business management and strategiesStrategic Planning

The fulfillment of institutional interestsmay be realized only if business iscapable of economic balance.

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Objectives

The sustainability of this equilibrium in related tobusiness capacity to increase its own econmic value.

Strategic Planning


The econimic principle and the value principlerepresent what stakeholders expect and needfrom business behaviour, thus affect everyproduction and business strategy.

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These principles affect business relationships with its context.This implies that decisions and actions performed by top government have tobalance production efficiency with stakeholders’, and particularly clients’,satisfaction.

Principles


Thus, businesses have to be effective and efficient,and have to fulfll context and market requirementsand expectations through a wise availableresources use.

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Sinthesis

OBJECTIVES RESULTSACTIONSDECISIONS


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VISION(GOAL & domiAINS)

MISSION(principles)

OBJECTIVESquantitative goals)

ProfitsValue

FINALITIES’(qualitative goals)

Technology

Dimensional growth

Know how, cohesion and motivation

Relational and informative capacity growth

CONTROLL STRATEGY IDENTIFICATION


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Sistematic

Strategic content Formalism

Time perspective:mid-long term

Organization connection

Business Planning

Platform for operative decisions

The characterizing conceptual elements


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The content

Business planning:

• Formalizes business strategic orientation;

• Allows the definition of long term objectives, of related actions based upon internaland external conditions analysis, of the organizational units involved, of resourcesalocation for actions and operative tasks;

• Represents a platform for operative decisions and for the evaluation of their efficacy.


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Functions

Effects

Razionalization of strategic problems

Internal integrationAction options Communication tool Controll tool

Homogeneous and integrated behavious

Integration development among

business units

Long term orientation and results evaluation

Identification and integration of

Business Units


Planning functions for strategic decisions

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Razionalization of strategic instances

External and internal conditions analysis Strategic drivers

identification

Formal exploitation of strategic decision

Transfer of strategic decision into sequences of actions

Reference and directions to operative decisions

Strategic Decisions

Preparation

Expoitation

Input to Action


Iterative logics of planning process

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Results

Experiences

Planned decisions Actions


Elements and attributes of strategic plan

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Degree of Complexity

Degree of Flexibility

Strategic Plan

Time span

Cyclicity

Actions

Resources

Mission, Objectives, Target

Strategies

Scenario

AttributesElements


Logic scheme of growth models

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Actual business expansion

Diversification in new businesses

New geographical areas development

Extension of products

Value chain extension

IDE

Partnerships

Direct Export

Development of product-market relation

Supply side

Demand side

Lateral

DomandaCanali distributiviServizi IntegratiProcessi produttiviTecnologie di processo o di prodottoMaterie prime o componentiRisorse distintive


Determinants and characteristics of a Business Strategic Area

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Planning

Product and services variety Concurrents

Organizational autonomy

Strategy determination and development

Specific objectives determination

Business Strategic Area

Market area


Relation between global strategy and single business area strategy

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Business performance evolution

Business visione and mission

Enterprise Vision and Mission

Business strategic orientation


Business unit strategy articulation

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Resources Development Strategy

Business unit Objectives

Key competitive elements

Production StrategyMarket Strategy

Global competitive strategy

Business Unit Strategy


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Basilar strategic orientation

Basilar strategic orientation is represented by the complex of values of businesslife. Every business, in fact, may follow different basilar values depending ofbusiness relation with social context, with market, with stakeholders, with eticalinstances, envinronment, etc..


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Entrepreneurial behaviours in relation with business context

Action in response to context changes

Anticipated action with respect to context changes

Induction of changes into context

Follower

Early mover

Pro-active

Strategic Politics


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STRATEGY POLITICS

Global and general designthat identifies directions anddevelopment paths in order toreach goals and objectives

Functional choices in relationwith global strategy affectingoperations and managementdecisions

Strategic Politics


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Business Strategies Hierarchy

Strategic Politics


’

STRATEGIE COMPETITIVE(strategie d ’area d ’affari)

STRATEGIE FUNZIONALI

Area

BV

endi

ta

Fina

nza

STRATEGYSTRUCTURAL

(Business Strategy)’

COMPETITIVE STRATEGIES’ ’

STRATEGIESFUNCTIONAL

Area

B

Mar

ketin

g

Fina

nce

Area

A

Area

C

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Business Strategical Goals

DIMENSIONAL DEVELOPMENT

NEW MANAGERIAL SETTING

RISKS REDUCTION

OWN MARKET-POSITION DEFENCE

MARKET ABANDON

Structural Strategies

Strategic Politics


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Business Strategies categories for dimensional development

1. Mono-sectorial 1.1. Horizontal Integration

1.2. Vertical Integration

2.1. Lateral Diversification

3.1. International Market development

3.2. Multinational Managerial Development

2. Poli-sectorial

3. International

Market sideSupplier side

Kind of Development Kind of Strategies

Strategic Politics


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Growth Opportunity – Intra-SECTORIAL Development

Known Business Area Extension

Modifications in product-market relation and geographical extension

Vertical Integration (value chain extension)

Known Products and Known Market:- geographical extension(national, international);- market penetration

Known Products and New Market :- uses and applications increase

New Products and Known Market :- production line increase

Market side

Supplier side

Strategic Politics


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Integrated Business

Ent

erpr

ise

Main Productions

…………..

Middle Productions

………..

Final Productions

…………

Mar

ket

Strategic Politics


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Diversified Business

Market

Automotive

Market

Tools Machines

Market

Marine Motors

Market

Electrical Products

Enterprise

Strategic Politics


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Business Strategies for Dimensional Develpment

Horizontal Development

Vertical Integrations

Diversification

International exporting

Short-run

Medium-run

Long-run

Long-run

Qm Increase

Value added increse

Resource Sharing

Business Area Expansion

Marketing

Finance

Management and Finance

Technology and Finance

No relevant

Risks reduction (about supply and sale)

Commercial and Productive Risk Diversification

GeographicalRisk Diversification

Develpment Strategies

Action TimingSub-findings Key Resources Main Effects

Strategic Politics


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Business Dimensional Development

Costs Disadvantages

Rigidity

Controll loss

Market Visibility

BenefitsRevenue Increase in terms of:

- volumes- prices

EFFECTS Disadvantages

Costs reduction:- Costs benefits (of “Scale”)- Learning improuvement

Internal LIMITS ExternalManagerial ResourcesOperating StructureFinancial Resources

Demand IncreaseCompetitors inluence

Internal CASES ExternalLack or bad using of Business Resources Business opportunities

Strategic Politics


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Business dimensional development Politics

Organizational development

Fusions and takeover

Joint venture

Internal Growth

Business Acquisitions

Business Alliances

Strategic Politics


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Renovation Process

Dimensional Development (Increase or Decrease)

New mktg mixNew Market positioning

Technological re-thinkingStrategical re-thinking

Re-construction

Crisis Factors

Dimensione dell’attività

Market Share Loss

Inadeguatezza tecnologica

Organizational problems

Business renovation Processes

Re-definition of System Organizational Scheme

Lack of Strategical Efficiency

Strategic PoliticsBusiness management and strategies

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Competitive advantage

• What is competitive advantage?

• Where the competitive advantage comes from?

• What are the competitive strategies?

Business management and strategiesCompetitive advantage

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What is competitive advantage

• The competitive advantage is the result of a strategythat leads the enterprises to gain and maintain afavorable position in the market (in which theyoperate)

• This position enables it to achieve sustainable higherprofitability than its average direct competitors.


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SUPPLY SIDE POINT OF VIEW:

The competitive advantage is an opportunity for sustainable profitabilityagainst the competitors, distinguishing themselves from the situations oferosion in the competitiveness of products from enterprises that, attested totheir positions, contend sales volume and market share

The competitive advantage comes from the business ability to do something,or manage a specific functions better than its direct competitors

An enterprise has a competitive advantage if it is able to offer more value tocustomers comparing to own competitors


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DEMAND SIDE POINT OF VIEW :

An enterprise has a competitive advantage if the spread offered is perceivedby customers as a greater benefit

So we can deliver competitive advantage:

The clients will prefer the offer which gives them a DBp > 1

DBp =DSp

DVp DBp = Differential benefit perceived

DVp = Differential value perceived

DSp = Differential sacrifice perceived to acquire the product offered


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DEMAND SIDE POINT OF VIEW :

The enterprise follows a competitive advantage against competitors whenthe difference between the highest price and the total cost, incurred toprovide the differential value, is greater than what is achieved bycompetitors :

Pr a – Co a > Pr b – Co b

Pr a = price charged by the enterprise a

Co a = total cost by enterprise a

Pr b = price charged by competitor b

Co b = total cost borne by the competitor b


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The source of competitive advantage

How the competitive advantage was created?

External sources of exchange

Consumer demand

Prices

Technology

Internal sources of exchange

The heterogeneity of resources between enterprisesleads to different results

Some enterprises are able to adapt more rapidly to externalexchange

Some enterprises are more creative and innovative


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The source of competitive advantage

A strategy to create competitive advantage

Ability to identify and exploit innovative opportunities better than competitors

Ability to produce a value for customers higher than what is provided by competitors

Critical resources and expertises

Strategic, organizativeand environmental fits

Rank distinctive Operational Excellence

Competitive advantage is understood as profitabilityabove the average of competitors


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TYPES OF COMPETITIVE ADVANTAGE

The enterprise can pursue a competitive advantage through different paths:


Enterprises will choose inside a set of results deriving by several factors thatcharacterize and often lead to choose combinations of the two benefits.

DIFFERENTIATION ADVANTAGE

COST ADVANTAGE


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SOURCES OF COMPETITIVE ADVANTAGE

The competitive advantage is due to a variety of activities, called SOURCES

TRADITIONAL SOURCES:

- Technological innovation of product;

- Product Promotion;

- Research and Development;

- Brands;

- Dimensional advantages;

- Production Techniques;

- Privileges Availability;

- Adapt to demand fluctuations.


NEW SOURCES:

- Relationships with partners;

- Relationship with the different contexts;

- Orientation to customer satisfaction;

- Use of digital technologies.


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MANAGEMENT OF COMPETITIVE ADVANTAGE

The competitive advantage must be:

- PROTECTABLE: not easily reproducible;

- DURABLE: to maintain for a certain period of time.

Steps to creating a competitive advantage:

- Identification of the advantage;

- Identification of sources;

- Management of the advantage.

The consolidation of a competitive advantage and its development involve acontinuous flow of "super-investments" in critical areas and involve a majoreffort of top management.


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THE SYSTEM OF RESOURCES AND SKILLS

At first, in the past, the analysis focused on the external environment andon business competitive choices compared to competitors. In this view theanalysis of system resources and skills is seen like an internal businesssystem adjustment.

The most recent literature, instead, focuses on the analysis of systemresources and skills (internal environment), because the ability to exploitopportunities and sustain the competitive advantage depends on the quantityand quality of available resources.

The Resource – based theory is based on :

the logic of the strategy is not based on the allocation of resources as asample adaptation to the opportunities, but is founded on existing leverageand potential resources able to create competitive advantages.


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The competitive advantage directly depends on the whole of individual resources andskills expressed by the enterprise.

A) Tangibles

RESOURCES (classification of Grant):

PhysicalFinancial

B) Intangibles

OrganizationalTechnological

C) Human factors

Management capacity and employees

Reputational




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Are detectable as the business capacity or ability resulting from the combination orintegration of resources.

Distinctive skills:The activities that an organization carries with special and different way (than its competitors).

SKILLS:

Core Competences:The fundamental ability to achieve high business performances.




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The sustainability of competitive advantage• The stability of the competitive advantage of a business depends on:

– durability of distinctive resources/skills – structural variables

• business size• privileged access to resources or market• limits to the strategies of competitors

– defense strategies• hide the superior performance• moral suasion • first niche conquest• causal ambiguity


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Business management and strategiesIntruments and models

Intruments and models

Business Plan Balanced Scorecard BCG Matrix IndexASA (Abell)

Control Strategic decisions Analysis

B.E.P.5 strenght (Porter)

PremiseTo achieve long term goals, the enterprise must primarilyconsider short term targets and quantitative/qualitativegoals, which must daily adapt to internal/external variableschanges, and must be coherent with general strategy.

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As a result of these circumstances, the business goals are distinguished infunction of their different time dimension:

– short term goals– medium-long term goals

The two types of objectives outline two different business choices domains;these choices are distinguished in short or long term decisions .

Plan and Control Instruments

Management & ControlThe control is an operational mechanism aimed to guideindividual and organizational behaviours toward theachievement of business goals.

This aim is pursued through:• analytical measurement• target parameters accountability

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Business management and strategiesPlan and Control Instruments

Management & ControlThe economic-financial measurements can be:

• quantitative - monetary• (e.g. income, capital, costs, revenues);

• quantitative non-monetary• (e.g. performances, time);

• qualitative• (e.g. customer satisfaction, business actions stakeholders-

oriented)

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Control can be referred to:

• actions: Used tools that act directly on employees behavior

• results: Used tools that tend to involve players on the outcomeof their activities and to gratify those who improve ownperformances

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Management & Control

Management & Control• The dimensions (variables) of control:

• ECONOMIC-FINANCIAL AND VALUE• ORGANIZATION (COHESION AND MOTIVATIONS)• INTERNAL KNOW-HOW• RELATIONAL CAPACITY• CUSTOMERS• SURVEILLANCE• ENVIRONMENT• ETHICS

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Business Plan

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What is it?

Who can use it?(What does it may be useful for?)

How is it made?

Plan and Control Instruments

What is a BP?

• It is an Operative tool that expresses, inorganic and systematic way, all thecomponents of an entrepreneurialproject in order to:

• plan• analyze• highlight strengths and weaknesses

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Who can use a BP?

• Entrepreneur for internal analysis and control• Enterprises employees for information and

strategy sharing• Banks to access credit or potential investors• The istitutional actors who manage the requests

for facilities

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How is made a BP?

• It consists of two parts:• descriptive• numerical

• The first part provides to a projectdescription in its different aspects

• The second one provides to a precisenumerical references on financialrequirements and economic projections

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The elements of BP

• The project presentation • Promoters and business presentation• Product/service (outcome)• The target market and competitors • Marketing strategies • The resource organization• The financial resources to invest • Economic-financial projections

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Project presentation

• Idea description • Target field definition • Product/service description• Generic classification of the market• Needs to satisfy description• Identification of customers

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Promoters presentation

• Previous experience, qualification andpromoters professional skills description

• The division of members roles

• Identification of the business distinctive elements– Choice of legal form

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The product / service

• Product / service detailed description

• Strengths and differentiation compared to products / services already exist

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The market• Market identification

- needs analysis- market definition (geographic, demographic) - processes and purchasing behavioures description

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• Market functioning- market and sales process functioning - distribution systems- special rules- payment terms

• The segmentation-choice between global or niche strategy

• Critical factors identification


The market

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• Direct competitors analysis• Similar products analysis• Expectation of competitors strategic reaction to a new business entry • New competitors analysis • Market constraints analysis

• Market funding:- procedures definition- questionnaire setting - determination of sample (pattern)- results analysis


The marketing plan

• Own quality dimensions assessing

• Own market position comparing

• Strengths/weaknesses and opportunities/threats evaluation (SWOT)

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The marketing plan

• Define the business strategy through:

- product- customer service- placing- promotion- direct sales - price

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Human resources

It’s requires:• Quantify the necessary staff and establish the roles

• Establish the staff’s assignment (employee or contractor, full time or part-time)

• Define Members tasks

• Set the budget

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Financial resources to invest

• Source identification:

- external debts (M/L term) - business resources

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Economic-financial projections

• Economic and financial impact (evaluation)

It should be developed:- costs statement- balance-sheet- cash flows

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Integration of quantitative and qualitative monitoring, theBalanced Scorecard (Norton and Kaplan, 1994)• The emphasis on quantitative parameters monitoring in the

short period may lead to underestimate the long-term goals(eg. Innovative efficiency sacrificed for short-runefficiency)

To avoid these drawbacks, we can use a monitoring toolthat integrates strategic and financial variables, quantitativeand qualitative: the Balanced Scorecard

The BS is a strategic monitoring tool that simultaneouslymonitors in a coherent and balanced way the variousrelevant parameters for the creation of competitiveadvantage.


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BS Contents• Financial Perspective

traditional indicators of profitability: how should we appear to our shareholders?

• Market Perspective customer satisfaction, loyalty rate, acquiring new customers, market shares: how should we appear to our customers?

• Perspective of internal processes of management performance indicators of the processes, particularly those processes that create value and customer value

• Perspective of the processes of learning and growth skills and motivation of human resources and efficient information system


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BS Fundamental CompetencesAbility to mobilize and use the skills and intangibles, in particular among them:

•ability to report •ability to promote innovative products and services for specific market segments •ability to produce at competitive cost, high quality and to reduce time to market •ability to develop skills and motivation in human resources


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Costruzione della BS

– vision definition – formalization of the strategy – articulation of strategies relating to the creation

of value in the four areas of Balanced Scorecard– critical success factors identification – identification of performance indicators in

relation to critical factors– definition of a target value for each of identified

measures– assigning each target to the liability of a manager


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The Balanced Scorecard


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Periodic review of the basic assumptions

• Basic assumptions Control is a systematic check of the premises on which it was based the strategy.

• The basic assumptions are related to macro and competitive environment in which the company operates

• The aim is to verify whether the competitive landscape and macro-environmental changes


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Environmental variables monitoring

• Macro-environmental analysis: Analysis of the "enlarged environment" Scenario analysis

• Analysis of the competitive environment Tools for evaluation of the attractiveness of the areas where the company operates or intends to operate


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Environmental Analysis

– National and international Economic environment (income, production, inflation ...)

– socio-demographic environment (rates of population growth, structure of households ...)

– socio-cultural environment (values, culture, opinions and "trends" ...)

– institutional environment (political and legal, national and supranational, eg. EU) and social stakeholders (competition, corporate law, labor law ...)

– technological environment (innovation, research ...)– domestic structural environment (infrastructure, training ...)


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MethodsThe latest scenarios are based on: • systemic analysis

critical variables (which are variables that assume a key role in the system?), strategies of the actors (such as logic of action?), breakpoints (what important events have marked discontinuity in the recent past?)

• factorial analysis critical variables changing ("axes" and lines of evolution definition)

• scenarios construction systems representations, quantification, "backcasting" behavior structuring


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Envirnmental Analysis ToolsAnalysis of the sector. The base il Porters

competition model:

• Identify the characteristics and intensity of the forces that determine the attractiveness of the sector and the competitive position of enterprises. Focus on major groups of competitors (strategic groups and competitive)

• Determine the actual impact of each of them a) graphics system b) system level (weighted score)


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Resources and competences Analysis

Evaluation of resources and competencies, identifying the resources and skills that:

•impact on the enterprise as a whole•impact on particular management areas,•are directly owned or held by potential partners and still accessible for each of them


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Resources and Competences Relations

– Historical analysis: time comparison of key parameters and indexes of the enterprise

– Comparison with the average values of the industry key indicators

– Benchmarking analysis: what to do (best practices) and to get the results of best performers in the sector?


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Quantitative monitoring: the budgeting• The planning of the strategic objectives is a hierarchical

process

• The "high level" strategic objectives are referred to operenting one (for example at the level of business unit or function) that can be monitored during short periods

• Budgets are short term plans that allow you to monitor the activities. Planning and control System

• The budget is structured hierarchically. Objectives expressed in terms of financial viability, lead to targets in terms of cost containment, increase productivity, etc ...


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Budget monitoring Logic• Control Objects (viability, efficiency, cash flow ...)

• Setting standards of control and range of variation

• Measuring results

• Comparing the results with the standards set

• Define the causes of deviations

• Take corrective action

• Budget: Revenues (sales and forecast), Investments (financial uses for plants, machinery, stocks), cost (costs of different business units)


The BCG Matrix

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The Boston Consulting Group Matrix supports the analysis of the product portfolio potential.

The BCG shows the capacity to contribute to profits performed by each product, thus directing strategies on product portfolio management.

Hypothesis:The collocation of products in a growing market needs high levels of liquidity

Experience effect: a high market share enables a cost competitiveness with comptetitors

Strategic tools


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The experience low and the experience curve

Unitary Cost

Experience: cumulated production0

20

60

40

80

100

Unitaty cost of value added (P-C) of an homogeneous product, measured in monetary constant values, decreases of a fixed and predictable percentage every time that total cumulated production dobles.

•The effect is stronger in the production launch

• Costs have to be decreased by inflation

•Experience: Q, not T

• Experience: Q, not Q/t


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• Learnign potential is low, or the product added value is low;

• A concurrent with little market share benefits of an experience effect greater than otherconcurrent due to its technological superiority;

• Experiences differences are leveraged by product/process innovations, with technology changes(the experience curve changes!);

• The experience effect exists, but it cannot be valorized for the scarse market sensibility onprice;

• A concurrent benefits of a supply privileged font.

It seems appliable mainly in activitieas in which greated volumes confer economic advantages, withimportant learning effects. There are situations in which it has little value, such as:

experience curve limits

The paradox of an experience curve always appliable would be a disaster for all minor concurrent,damnded by leaders to stay in mediocrity and dissapear. Fortunately this is neglected by realbusiness!


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Mar

ket g

row

th r

ate

Relative market share (competitive capacity)

high low

high

low

Cash cow Dog

Star Questions mark+

-

Liquidity needs

+Liquidity generation -

Strategic tools

The BCG Matrix


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The BCG Matrix

Rea

l mar

ket a

nnua

l gro

wth

rate

Relative market share

low

hig

h

high low

dog

Profits: low, unstable

Cash flows: in equilibrium, or negative

Strategies: disinvest

cash cow

Profits: high, stable

Cash flows: high, stable

Strategies: save cash

star

Profits: high, stable, growing

Cash flows: in equilibrium

Strategies: invest in growth

question mark

Profits: low, unstable, increasing

Cash flows: negative

Strategies: analysis to understand if the product will be a star or a dog

Strategic tools


86

Trajectory 1 The innovator: financial incomes generated by cash cow are invested in R&D, future stars

Trajectory 2 The follower: utilizes incomes generated by cash cow to solve the question mark strenghtening the market share (against the leader)

Trajectory 3 Loss: from star to question mark, for unsufficient investments

Trajectory 4 Mediocrity: from qustion mark to dog, for unsufficient investments

In fig. 4 possible trajectories:

2 successful, 2 unsuccessful

Strategic tools

The BCG Matrix


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Cash cow Dog

Star Questions mark+

-

+ -

1

R&D

2

3

4

Strategic tools

The BCG Matrix


Mar

ket g

row

th r

ate

Relative market share (competitive capacity)

high low

high

low

Liquidity needs

Liquidity generation

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The BCG Matrix limits

The BCG Matrix has some limits:

Hypothesis 1 related to the experience effect is not siutable for all kind of products, butmainly for volume productions (high defendable competitive advantage and fw,determined, competitive advantage fonts.

The model takes into accoun only internal competitive advantage, and not the externalsource: some dogs may, valorized with distinctive capacities, create profits for clientswilling to pay the over price with (with reference to the leader competitor).

Recomentations need to be generic and systemic. After price, place, communication andproduct strategies have to be detailed.

Strategic tools


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But how to manage the BCG Matrix?

New Product Development

o New idea

o First Selection

o Economic analysis

o Financial Development

o Technical Development

o Product development

o Commercial development

o Repositioning

o Increase quality

o Increase functionality

o Improve aesthetics

Existing Products Management

Strategic tools


90

Companies today have to do their competitive daily updating the products they offerand new products with balancing cash crops, paying the money earned by winningproducts and established R & D and promotion of products .

CONCLUSIONS: The search for a balanced portfolio

Strategic tools


9191

Value creation

Value constellation (Normann-Ramirez)

Value system (Porter)

Value chain (Porter)

Value network (……….)


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Every strategy directed to sustainable competitive advantage requires knowledge aboutbusiness activities and business organization, in order to act on these and improuve withrespect to concurrents.

With these premises Porter defined a model of business internal analysis to supportefficience and efficacy improvements in all activities involved in vale creation: thevalue chain

the premises...

Business management and strategiesValue creation

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Incoming logistics

Outgoing logisticsTransformaion Marketing Services

Supplying

Administration

Human resources management

Infrastructural activities

Research and Development

Value creation


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Specific actions on efficacy and effectiveness of internal activities may decreas costs (cost leadership) or enrich the product (differentiation strategies), or may enable strategies focused to market acquisition.

The value chain helps a better analysis of competitive position with reference with concurrents identifing strenghts and weaknesses

Interaction management and interconnections fluidification among activities: internal synergies for client perceived value

C

INCOMING LOGISTICS

OUTGOING LOGISTICSTRASFORMATION MARKETING SERVICES

SUPPLYING

ADMINISTRATION

Human Resources management

INFRASTRUCTURAL ACTIVITIES

RESEARCH & DEVELOPMENT

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Value creation system

Porter value system model:• Is based on a sequencial logic;• Is not a win – win logic, because it

is based on power relations;• It is based on value added creation.

final client

Suppliers

Market

But how do business relate nowadays?


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CLIENTS

Co-maker

Co-maker

Co-maker

Co-maker

Co-maker

Co-maker

Co-maker

Co-maker

Co-maker

Offer Systems value constellation made by da co-maker

Clients, just other actors, are active and protagonist in value creation

Coherent with stakeholder theory and VSA

Not sequential anymore, but contemporary and highly interactive

Value constellation

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Among the chain (1985) and the constellation (1995) setting background goea tochange:

The reletions are not based on force and power logic, but on interactive andcollaborative mechanisms of Collaboration, mutual benefit and trust.

This interpretation highlights that business distinctive competences are not neighboringin the chain, but extend to relations (to activate, to protect, to stabilize). This stimulatesthe emergence of:

business networks, network, constellations, clusters.

The value constellation twists the Porter’s logic of value creation (based on relations ofpower and economic convenience) to search for a harmonious coordination and synergybetween the actors, to promote "win-win“ logic. The increase in value added is sharedbetween the company, co-makers and customers.


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The constellation is very close to the cultural settings of Normann and Ramirez,scholars of services companies.

The chain, however, is more easily interpretable for individual business.

The constellation seems most appropriate to provide an approach, an attitude to therelations between business systems, able to increase value for all stakeholders(including customers), because it is based on a culture of excellence, improvementand lifelong learning.

Towards the value networks....


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Value ChainValue Networks

Value Constellation

Value System

Historical evolution for value creation processes


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The adopted perspective about value creation

Value generation processes are complex and have been thoroughly analyzed inliterature, deepening value chain processes (Porter, 1986), value constellationsmanagement (Normann, Ramirez, 1993), stakeholder value (Charreaux, Desbrieres,2001), etc.

Enterprises are no more left alone in their value generation processes (Hakansson &Snehota, 1989), hence we are close to value generation processes that involve multipleactors (resources owners), who have to play an active role.

Value Creation


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Value generations and networks

Articulated and multiple actors value generationprocesses, characterizing today competition, driveforward value co-creation (Prahalad, Ramaswamy,2004), and they intrinsically suggest the deepening ofnetwork concept.

The concept of network has been investigated in manydisciplines in literature (social sciences, biology, naturalsciences, etc.).

Value Creation


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In economic studies, networks theories have dealt with many network issues, such as:

Net genesis Thompson: 1967; Bateson:1989; Lomi:1991

Net structure Richardson:1972; Burt:1982, 1992; Butera:1990;Hedlund:1986; Bartlet & Goshal:1990;Lorenzoni:1990; Nohria & Eccles:1992

Net government Jones, Hesterly & Borgatti:1998

Network and relations

Williamson:1975, Ouchi:1980; Johanson & Mattson:1984, 1987; Granovetter:1985; Powell:1990; Hakansson & Snehota:1995

Net strategies Jarrillo:1988; Jones, Hesterly & Borgatti:1998

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About networks

Rather, in this contribution, we underline how:o Network may be an organizational form;o Network may be an approach with which investigate business arena (networklenses…);o Networking may be a business strategy;o Networks may describe social patterns involving enterprises as well as individuals.

But most we would like to refer to networking as acultural attitude

Value Creation


business management a.y. 2010 -2011 prof. francesco polesewebuser.unicas.it/madi/polese/uploads/bm -...

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