part3 strategy
TRANSCRIPT
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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-1
Strategic ManagementMarket Dynamics
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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-2
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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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-3
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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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-4
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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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-5
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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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-8
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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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-12
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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Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-15
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