thought for the day the winner is always part of the answer: the loser is always part of the problem

THOUGHT FOR THE DAY

The Winner is always part of the answer:The loser is always part of the problem.

BE A WINNER – ACTION STEPS

Ashta sutras • Be a good finder• Make a habit of doing it now• Develop an attitude of gratitude• Get into a continuous education program• Build positive self-esteem• Stay way from negative influences• Learn to like the things that need to be done• Start our day with a positive

STRATEGIC MANAGEMENT

After the process of LPG was initiated by the Govt. of India, there has been sweeping changes in the business scenario.

Ongoing liberalization process – made imperative for Indian companies to consider Starategic Management seriously.

1995 - 25th National Business Conference –sponsored by Harvard Business School highlighted the powerful“Strategy” as an important variable in the study of

organization.

Three Big Strategic Questions

• Where Are We Now?

• Where Do we Want to Go?

• How Will We Get There?

1.Present situation2.direction-3.C&E S

STRATEGY

Dictionary meaning: STRATEGY - long term Plan or Policy.

Ex: Company decides – sales growth of 35% and device to achieve this by acquiring other Co’s instead of introducing new products.

Acquisition –becomes strategy chosen by Company.

Strategy• Strategy is management’s “game plan” for

running the business. A company’s strategy consists of the competitive moves,

internal operating approaches, and action plans devised by management to produce successful performance.

Why Managers need strategies?

HOW the organization’s business will be conducted ?

HOW performance targets will be achieved?

What is a Strategic Plan?• A strategic plan

specifies where a company is headed and HOW management intends to achieve the targeted levels of performance.

What is the purpose of strategic management?

- To exploit and create new and different opportunities for tomorrow; long range planning, in contrast, tries to optimize for tomorrow the trends of today.

What is STRATEGIC MANAGEMENT? The strategy of the firm is the match

between its internal capabilities & its external relationships.

It describes how it responds to its

suppliers, its customers, its competitors & the social & economic environment within which it.

1.What is strategic Management?2. Define Srategic management?

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Nature of Strategic ManagementNature of Strategic Management

1. Determining the mission of the Company, about its purpose, philosophy, & goals.

2. Developing A Company Profile that reflects internal conditions & capabilities.

3. Assessment of the Company’s external environment in terms of both competitive & general contextual factors.

4. Analysis of possible options uncovered in the matching of the company profile with the external environment.

5. Identifying the desired options uncovered when possibilities are considered in the light of the company mission.

The Nine Task of Strategic The Nine Task of Strategic ManagementManagement

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Nature of Strategic ManagementNature of Strategic Management

6. Strategic choice of a particular set of long-term objectives and grand strategies.

7. Development of annual objectives and short term strategies compatible with long term objectives and grand strategies.

8. Implementing strategic choice decisions based on budgeted resource allocations and emphasizing the matching of tasks, people, structures, technologies, and reward systems.

9. Review and evaluation of the success of the strategic process to serve as a basis for control.

The Nine Task of Strategic ManagementThe Nine Task of Strategic Management

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CHARACTERISTICS OF STRATEGIC MANAGEMENT

Three Levels of Strategy• Corporate level: board of directors, CEO &

administration [Highest]• Business level: business and corporate

managers [Middle]• Functional level: Product, geographic, and

functional area managers [Lowest]

13

Three levels of Strategic Management Structures

15

LEVELS OF STRATEGIC PLANNING – CORPORATE LEVEL

• It addresses fundamental questions such as what is the purpose of enterprise.

• What type of business to be choosen & how resources to be allocated.

• • Strategy – developed by (BOD,CEO etc., ) Decisions are broad

based carry greater risk, cost, and profit potential.• EX: Diversification & M&A’s.

• Include decisions : Choice of businesses, dividend policies, sources of long-term financing, and priorities for growth

16

Levels of Strategic Planning: Business level

Process concerned primarily how to manage the interests and operations of a particular unit within the organisaion(SBU).

The heads of respective Business units develop strategies with the approval of top management.

Decisions include allocation of resources within the unit and co-ordinating functional level strategies developed by functional managers.

Help bridge decisions at the corporate and functional levels.

Less costly, risky, and potentially profitable than corporate-level decisions.

Include decisions on plant location, marketing segmentation, and distribution

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Levels of Strategic Planning: Functional level

• Implement the overall strategy formulated at the corporate and business levels.

Functional Managers: Marketing, Finance, Production, Personnel(HR) etc., are reviewed by business heads.

• Involve action-oriented and operational issues.• Relatively short range and low risk.• Modest costs: depend upon available resources.

18

CHARACTERISTICS OF CORPORATE, BUSINESS AND FUNCTIONAL STRATEGIES

Characteristics Corporate Strategy

Business Strategy Functional Strategy

Scope Entire Organisation

SBU or single business unit

Functional Area

Source and Motivation /direction

Board of Directors / CEO

Corporate Strategy

SBU strategy or single business company strategy

Responsibility Top level corporate managers

Top level SBU managers or top level business company managers

Functional level managers

Time Horizon Long term Medium to long term

Short to long term

Specificity General statements of overall direction and intent

Concrete and operationally oriented

Action and implementation oriented

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Importance & relevance of Strategic Management

• Managers at all levels interact in planning and implementing strategy.

• Similar to participative decision making.

• Assessing strategy formulation requires looking at non-financial evaluations as well as financial ones.

• Promoting positive behavioral consequences enables achievement of financial goals

20

STRATEGIC MANAGEMENT PROCESS

The term “Strategic Management Process’ refers to the steps by which management converts a firm’s mission, objectives and goals into a workable strategy”

In a dynamic environment, each firm needs to tailor its SMP in ways best suits its own capabilities & situational requirements.

21

Strategic Management ProcessThe strategic management

process has two parts:

1. The information process- involves collecting and analyzing information about the external and internal environments.

Information about the organization's strength & weaknesses, when combined with information about external opportunities & threats, offer a stronger foundation for informed decisions about strategic direction.

22

Contd………..2. The decision process covers four important steps:

a) Development of strategic alternatives – reach its mission & objectives

b) Strategic Choices –Planners decide how & when to translate strategic choice into action.

C) Implementations

d) Assessment: Evaluation of the effectiveness and efficiency of the strategic direction that organization has followed.

23

Strategic Management –Business Model

24

COMPANY’S STRATEGY AND ITS BUSINESS MODEL

• Company Mission• External Analysis• Long-Term Objectives• Short-Term Objectives• Policies Empowering

Action• Strategic Control &

Continuous Improvement

• Internal Analysis• Strategic Analysis &

Choice• Generic & Grand

Strategies• Functional Tactics• Restructuring,

Reengineering & Refocusing

25

Significance of crafting & execution of strategy

• It provides the roadmap for the firm: it shows the way for achieving targets.

• It helps the firm utilize its resources in the best possible manner.

• It allows more effective allocation of time and resources for identifying opportunities.

• The firm can respond to environmental changes in a better way – by exploiting opportunities to its advantage and avoiding costly mistakes in investment decisions.

26

Significance of crafting & execution of strategy

• It helps prepare the firm to confront future challenges through certain proactive steps and even shape the future to its advantage.

• It gives encouragement to forward thinking.

• It encourages a favorable attitude towards change.

• C&E Strategy is all about winning the business game plan.

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VISION

• Vision- A vividly descriptive image of what a company wants to be or wants to be known for in future.

• Basic element of vision• An organization fundamental reason for existence

beyond just making money.

• Who we want to be and where we want to go? Reliance- Dhirubai Ambani vision

29

Examples of corporate vision statements

• BHEL: “ A world class innovative, competitive & profitable engineering enterprise providing total business solutions”.

• Colgate- Palmolive:" To be the Co. of first choice in oral & personal hygiene by continuously caring for consumers and partners”

• NTPC: “To make available, reliable and quality power in increasingly large quantities”

What is a Company Mission?• Company Mission:

A broadly framed but enduring statement of a firm’s intent.

It defines an organization business & it

is a reflection of a vision.

3131

Mission

Empower people through great software anytime, anyplace, and

on any device.

3232

Mission

DELTA AIRLINES

. . . . . . we want Delta to be the

WORLDWIDE AIRLINE OF CHOICE.WORLDWIDE AIRLINE OF CHOICE.

The Need for an Explicit Mission• Why is this firm in business?• What are our economic goals? • What is our operating philosophy in terms of quality,

company image, and self-concept? • What are our core competencies and competitive

advantages?• What customers do and can we serve? • How do we view our responsibilities to stockholders,

employees, communities, environment, social issues, and competitors?

Formulating a Mission• The typical business begins with the beliefs, desires, and

aspirations of a single entrepreneur • These beliefs are usually the basis for the company’s

mission• As the business grows or is forced to alter its product,

market, or technology, redefining the company mission may be necessary

Mission Statement Components1. Customer-market2. Product-service3. Geographic Domain4. Technology5. Concern for Survival6. Philosophy7. Self-concept8. Concern for Public Image

3636

Setting ObjectivesSetting Objectives

• The purpose is to convert the mission into Specific Performance Targets

• Serve as yardsticks for company progress and performance.

• Objectives and Goals - provide the foundation for all managerial activities.

They can be considered as ends or aims towards which all activities are directed.

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Two Types of ObjectivesTwo Types of Objectives

• FINANCIAL OBJECTIVES

• STRATEGIC OBJECTIVES

• Short-Run• Long-Run

3838

Types of Objectives Required

Outcomes focused on improving financial performance

Outcomes focused on improving long-term, competitive business position

Financial Objectives Strategic Objectives

$

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Financial Objectives

Grow earnings per share 15% annually

Boost annual return on investment from

15% to 20% within three years

4040

Strategic Objectives

Increase firm’s market share .

Overtake key rivals on quality or customer service

or product performance.

Attain lower overall costs than rivals

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Formulating Strategy is an Exercise in Formulating Strategy is an Exercise in EntrepreneurshipEntrepreneurship

• Risk-taking and venture someone's

• Innovation and business creativity·

• A keen eye for spotting emerging market opportunities·

• Choosing among alternatives

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Formulating /Crafting a Formulating /Crafting a StrategyStrategy

• HOW to out compete rivals and win a competitive advantage.

• HOW to respond to changing industry and competitive conditions

• HOW to defend against threats to the company’s well-being

• HOW to pursue attractive opportunities

44

Strategy Makers: The CEO

• A firm’s CEO plays a dominant role in strategic planning

• The CEO’s principal duty is giving long-term direction to the firm

• The CEO bears ultimate responsibility for the firm’s success and strategic success

• CEOs are typically strong-willed, company-oriented individuals

45

Strategy Makers

• Ideal strategic team includes decision makers from all three levels

• Top managers must give final approval• Strategic decisions coincide with

managers’ responsibilities

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Why is a Company’s Strategy Constantly Evolving?

• Changing market conditions· • Moves of competitors· • New technologies and production capabilities· • Evolving buyer needs and preferences· • Political and regulatory factors·• New windows of opportunity·• Fresh ideas to improve the current strategy· • A crisis situation

Three Essential Components:• Basic Product or Service • Primary Market• Principal Technology

If a firm uses a “silver bullet” mission for outsiders to read, it will include these three components.

Primary Company Goals:• Survival – A firm that is unable to survive will

be incapable of satisfying the aims of any of its stakeholders.

• Profitability – A firm’s profitability is the mainstay goal of a business.

• Growth – A firm’s growth is tied inextricably to its survival and profitability. Growth in this sense must be broadly defined.

Company Philosophy• Company philosophy is often called

company creed.• Usually companies are appears within the

mission statement• Reflects the basic beliefs, values, aspirations,

and philosophical priorities to which strategic decision makers are committed in managing the company

Public Image• Both present and potential customers

attribute certain qualities to particular businesses.

• Firms seldom address the question of their public image in an intermittent fashion.

• Firms should be concerned with their public image even when there is no public agitation.

Strategic intentWhat is strategic intent?

Strategic intent is about clarity, focus and Inspiration

strategic intent of a company describes how acompany is going to realize its vision.

Strategic intent provides a particular point of view about the long term vision or aspiration ofthe company.

Is it time for you, your team or your organization to move beyond a Vision or Mission Statement to a compelling designof your future?

The famous Goethe quote says it all: "Whatever you can do or dreamyou can do, begin it now. Boldness has genius, power and magic in it

Balanced Score Card

• The concept of Balanced Scorecard was developed in the early 1990’s by Robert S. Kaplan and David P. Norton.

• The Balanced Scorecard (BSC) is a conceptual framework enabling an organization in clarifying its vision and strategy, thus effectively translating them into action.

• .

Balanced Score Card

• The BSC provides a "measurement tool" to evaluate businesses in a balanced way.

• Help to assess improvement opportunities.• It is very useful, and the most advanced way to monitor

(measure) business performance.

It is the measurement part of the Demming (Plan, Do, Check and Adjust) Circle. In order to achieve Performance Improvement, structured improvement implementation programmes are needed.

Balanced Score Card

• The BSC method of Kaplan and Norton is a strategic approach and performance management system that enables organizations to translate a company's vision and strategy into implementation, working from 4 perspectives:

Balanced Score Card

• This performance management approach provides feedback around both the internal processes and external outcomes, essentially focusing on four indicators:

• 1. Financial perspective,• 2. customer perspective,• 3. business process perspective,• 4. learning and growth perspective.•

BALANCED SCORE CARD

• In the Design and Deployment of the BSC, 5 key stages can be distinguished:

• 1. Select Critical Success Factors (CSF) in the 4 BSC perspectives and explore interrelationships2. Identify Performance Indicators3. Set Targets4. Deploy whole scorecards to business sites5. Deploy goals within business sites.

BSC- FINANCIAL PRESPECTIVE

. Timely and accurate funding data will always be a priority, and managers will do whatever necessary to provide it.

The current emphasis on financials leads to the "unbalanced" situation with regard to other perspectives.

There is perhaps a need to include additional financial-related data, such as risk assessment and cost-benefit data, in this category.

http://www.valuebasedmanagement.net/methods_raroc.html

http://www.valuebasedmanagement.net/methods_cost-benefit_analysis.html

BSC –CUSOMER PERSPECTIVE

• Ad 2: The BSC / Customer perspective: recent management philosophy has shown an increasing realization of the importance of customer focus and customer satisfaction in any business. These are leading indicators: if customers are not satisfied, they will eventually find other suppliers that will meet their needs. Poor performance from this perspective is thus a leading indicator of future decline, even though the current financial picture may look good. In developing metrics for satisfaction, customers should be analyzed in terms of kinds of customers and the kinds of processes for which we are providing a product or service to those customer groups.

Business Process perspective

• Ad 3: The BSC / Business Process perspective refers to internal business processes.

• Metrics based on this perspective allow the managers to know how well their business is running, and whether its products and services conform to customer requirements (the mission).

BSC- Learning Growth Perspective

• Includes employee training and corporate cultural attitudes related to both individual and corporate self-improvement.

• In a knowledge-worker organization, people are the main resource. In the current climate of rapid technological change, it is becoming necessary for knowledge workers to be in a continuous learning mode.

Analysing a Company’s External Environment

MODULE 3MODULE 3

Learning Objectives1. Analysing Company’s External

Environment.2. SWOT3. Strategically relevant components of

a company’s external environment. Economic, social, political,

technological, and ecological influences on a business

4. The five forces model of industry analysis

Entry barriers, supplier power, buyer power, substitute availability, and competitive rivalry on a business

Analyzing Company’s External Environment

• Features of Exernal Environmental Analysis• Holistic Exercise: . It is a way of looking at the forest,

rather than the trees.• Exploratory Process: tries to explore the unknown

terrain, putting emphasis on what could happen. The focus is clearly on alternative future choices.

• Continuous Activity: It is not one shot deal: it is continuous process.

• What are the strategically relevant components of a company’s external environment?

• Why the components of a company’s external environment are so important?

Strategically relevant components of a company’s External

Environment Comprised of following Components:• Economic Environment• Socio-cultural Environment• Political Environment• Legal Environment• Technological Environment • Ecological environment• International environment• The survival and growth of a firm depends on its

ability to adopt its strategies and organizational structure to a rapidly changing environment

Economic Factors Economic factors throw light on the

nature and direction of the company in which a firm operates

1. Prime interest rates2. Inflation rates3. Trends in the growth of the

gross national product 4. Unemployment rates5. Globalization of the economy6. Outsourcing

Economic Factors• Interest Rates: encourage consumer spending, retailers, construction companies,

automobile manufactures benefit because lower rates trigger demand for durable goods. Lower rates are conducive to capital expenditures and to merger and acquisitions.

• In contrast, high rates dampen business plans to raise funds to expand or to replace outdates facilities.

• Inflation Rate: High rates boost costs of doing business.

• Unemployment Rate: When unemployment is high, the company is able to be very selective whom it hires but consumer buying may decline.

• GDP: It is the value of a nations annual production of goods and services and serves as a major indicator of economic growth.

• A decline in GDP signals reduced consumer expenditure and lower demand for business outputs.(GDP rates fallen from 7.5% in 1996-97 to 5.8 percent in 2000-2001.

Socio-cultural Environment

• Cultural sensitiveness:• Business firms operates in a socio-cultural environment and

their strategies are formulated keeping this factor in view.• Western countries are modern and liberal.• Muslim societies are generally conservative.• Japanese society despite a very high level of economic

development still remains certain tenets of orthodoxy.

Business firms aiming at capturing markets for its products in these diversified societies has to be careful about the cultural sensitiveness.

68

Socio-cultural Environment

Each society has its own culture which consists of the customs, habits, beliefs, values, attitudes, language and other forms of interaction between the members of the society.

Business firms aiming at capturing markets for its products in these diversified societies has to be careful about the cultural sensitizer's.

69

Ex: Western societies are modern and liberal, people belonging to these societies are more receptive to new products. They have no prejudice against any kind of advertising.

Ex: Mc Donald –fast food giant –not been much headway into lunch mark in India.

1. Premium look –tag –for high society’ 2. Non-oily & less spicy 3. Non-vegetarian label

Political Environment

• What constitutes Political Environment?

• Business activity has suffered a lot due to political instability. In countries like Afghan and Iraq has suffered due to political instability.

• In India over the past ten years there has been political uncertainty in this country on account of coalition Governments at the centre.

• These Governments have been very much unstable and lacked a clear cut policy direction. This is not an ideal situation for the growth of business.

71

Technological Environment

• In India, this happened in automobile industry for about four decades since independence. The technology of Fiat was unsophisticated. The users had no choice and thus the product survived for a long period.

• With the setting up of Maruti Udyog limited the situation changed due to superior technology.

72

Technological Factors

• Technological forecasting helps protect and improve the profitability of firms in growing industries.

• It alerts strategic managers to impending challenges and promising opportunities.

• The key to beneficial forecasting of technological advancement lies in accurately predicting future technological capabilities and their probable impacts.

Ecological Factors

• Ecology refers to the relationships among human beings and other living things and the air, soil, and water that supports them.

• Threats to our life-supporting ecology caused principally by human activities in an industrial society are commonly referred to as pollution

• Global warming

International Environment

Monitoring the international environment involves assessing each non-domestic market on the same factors that are used in a domestic assessment.

• While the importance of factors will differ, the same set of considerations can be used for each country.

• Economic, political, legal, and social factors are used to assess international environments.

FIVE FORCES MODEL-PORTER’S

• .

• Porter's framework consists of five fundamental competitive forces:

1. Entry of competitors2. Threat of substitutes3. Bargaining power of buyers4. Bargaining power of suppliers5. Rivalry among the existing players

Porter's framework consists of five fundamental competitive forces:1. Entry of competitorsassessing the ability of new entrants to start operations and the structural barriers they must overcome;

2. Threat of substitutesassessing the ability of new products with superior characteristics to replace existing product(s) or service(s);

3. Bargaining power of buyersassessing the relative strength and number of buyers;*

4. Bargaining power of suppliersassessing the relative strength and number of sellers;*

5. Rivalry among the existing playersassessing the relative competitive strength of rival firms.*

The Five Forces are Unique to Your Industry

• Five-Forces Analysis is a framework for analyzing a particular industry.

– Yet, the five forces affect all the other businesses in that industry.

The purpose of Five-Forces Analysis-Industry driving forces

• The five forces are environmental forces that impact on a company’s ability to compete in a given market.

• The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

PORTERS FIVE FORCES MODEL

• The model of the Five Competitive Forces was developed by Michael E. Porter in his book „Competitive Strategy: Techniques for Analyzing Industries and Competitors“ in 1980.

• Since that time it has become an important tool for analyzing an organizations industry structure in strategic processes.

• Porters model is based on the insight that a corporate strategy should meet the opportunities and threats in the organizations external environment. Especially, competitive strategy should base on and understanding of industry structures and the way they change.

•

PORTER’S FIVE FORCES MODEL

• Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry.

• The objective of corporate strategy should be to modify these competitive forces in a way that improves the position of the organization.

• Porters model supports analysis of the driving forces in an industry. Based on the information derived from the Five Forces Analysis, management can decide how to influence or to exploit particular characteristics of their industry.

•

Threat of New

Entrants

Threat of New

Entrants

Porter’s Five Forces Model of Competition

MICHEAL PORTER- 5 FORCES MODEL

Threat of New Entrants

Barriers to Entry

Expected RetaliationExpected Retaliation

Government PolicyGovernment Policy

Economies of ScaleEconomies of Scale

Product DifferentiationProduct Differentiation

Capital RequirementsCapital Requirements

Switching CostsSwitching Costs

Access to Distribution ChannelsAccess to Distribution Channels

Cost Disadvantages Independent Cost Disadvantages Independent of Scaleof Scale

Bargaining Power of Suppliers

Threat of New

Entrants

Threat of New

Entrants



Suppliers exert power in the industry by:

* Threatening to raiseprices or to reduce quality

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

Suppliers are likely to be powerful if:Suppliers are likely to be powerful if:

Supplier industry is Supplier industry is dominateddominated by a by a few firmsfew firmsSuppliers’ products have few Suppliers’ products have few substitutessubstitutes

Buyer is not an important customer to Buyer is not an important customer to suppliersupplierSuppliers’ product is an important Suppliers’ product is an important input to buyers’ productinput to buyers’ product

Suppliers’ products are differentiatedSuppliers’ products are differentiated

Suppliers’ products have high Suppliers’ products have high switching costsswitching costs

Supplier poses credible threat of Supplier poses credible threat of forward integrationforward integration

Bargaining Power of Buyers

Threat of New

Entrants

Threat of New

Entrants




Buyers compete with the supplying

industry by:

* Bargaining down prices

* Forcing higher quality

*

Buyer groups are likely to be powerful if:Buyer groups are likely to be powerful if:They buy large volumes, there is a They buy large volumes, there is a concentration of buyers.concentration of buyers.

Purchase accounts for a significant Purchase accounts for a significant fraction of supplier’s salesfraction of supplier’s sales

Supplying industry comprises a large No.Supplying industry comprises a large No.Of small operators.Of small operators.

Buyers face few switching costsBuyers face few switching costs

Buyer presents a credible threat of Buyer presents a credible threat of backward integrationbackward integration

Product unimportant to qualityProduct unimportant to quality

Buyer has full informationBuyer has full information

Threat of Substitute Products

Threat of New

Entrants

Threat of New

Entrants





Products with similar function limit the prices firms can charge

Threat from substitutes exists if Threat from substitutes exists if there are alternative products there are alternative products with lower prices of better with lower prices of better perform parameters for the perform parameters for the same purpose.same purpose.

Electronic security systems in Electronic security systems in place of security guardsplace of security guards

Fax machines in place of Fax machines in place of overnight mail deliveryovernight mail delivery


Threat of New

Entrants

Threat of New

Entrants

Rivalry Among Competing Firms

in Industry




Rivalry Among Existing Competitors

Intense rivalry often plays out in the following ways:Intense rivalry often plays out in the following ways:

Jockeying for strategic positionJockeying for strategic positionUsing price competitionUsing price competitionStaging advertising battlesStaging advertising battles

Making new product introductionsMaking new product introductionsIncreasing consumer warranties or serviceIncreasing consumer warranties or service

Occurs when a firm is pressured or sees an opportunityOccurs when a firm is pressured or sees an opportunityPrice competition often leaves the entire industry worse offPrice competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, but Advertising battles may increase total industry demand, but may be costly to smaller competitorsmay be costly to smaller competitors

CutthroatCutthroat competitioncompetition is more likely to occur when: is more likely to occur when:

Rivalry Among Existing Competitors

Numerous or equally balanced competitorsNumerous or equally balanced competitorsSlow growth industrySlow growth industryHigh fixed costsHigh fixed costs

Lack of differentiation or switching costsLack of differentiation or switching costs

High storage costsHigh storage costs

Capacity added in large incrementsCapacity added in large increments

High strategic stakesHigh strategic stakesHigh exit barriersHigh exit barriers

Diverse competitorsDiverse competitors

Competitor Analysis

The follow-up to Industry Analysis is effective The follow-up to Industry Analysis is effective analysis of a firm’s analysis of a firm’s CompetitorsCompetitors

CompetitiveCompetitiveEnvironmentEnvironment

Industry Environment

Competitor AnalysisAssumptionsAssumptions

What assumptions do our competitors hold about the future of industry and themselves?

Current StrategyCurrent StrategyDoes our current strategy support changes in the competitive environment?

Future ObjectivesFuture ObjectivesHow do our goals compare to our competitors’ goals?

CapabilitiesCapabilitiesHow do our capabilities compare to our competitors?

ResponseWhat will our competitors do in the future?

Where do we have a competitive advantage?

How will this change our relationship with our competition?

Future ObjectivesHow do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?What is the attitude toward risk?

What Drives the competitor?

Competitor Analysis

What is the competitor doing?What can the competitor do?


Current StrategyHow are we currently competing?

Does this strategy support changes in the competitive structure?

Competitor Analysis

What does the competitor believe about itself and the industry?



Does this strategy support changes in the competition structure?

Do we assume the future will be volatile?

Are we assuming stable competitive conditions?

What assumptions do our competitors hold about the industry and themselves?

Assumptions

Competitor Analysis

What are the competitor’s capabilities?





Are we operating under a status quo?


Assumptions

What are my competitors’ strengths and weaknesses?

How do our capabilities compare to our competitors?

CapabilitiesCapabilities

Competitor Analysis





Are we operating under a status quo?


Assumptions

ResponseWhat will our competitors do in the future?Where do we have a competitive advantage?

How will this change our relationship with our competition?

CapabilitiesWhat are my competitors’ strengths and weaknesses?

How do our capabilities compare to our competitors?

Competitor Analysis

END OF MODULE - 3

THANK YOU

MODULE-4

ANALYSING A COMPANY’S RESOURCES AND COMPETITIVE POSITION

Analysis of the company’s strategiesSWOT ANALYSISVCABENCHMARKING

SWOT Analysis• Strengths• Weaknesses• Opportunities • Threats

Appraising a company’s strengths and weaknesses & its external opportunities & threats, known as SWOTAnalysis.

SWOT analysis - powerful tool for sizing up a Company’s resource capabilities and deficiencies, its market opportunities, and the external threats to its futurewell-being.

The purpose of SWOT Analysis

• It is an easy-to-use tool for developing an overview of a company’s strategic situation.

– It forms a basis for matching your company’s strategy to its situation

SWOT is the starting point

• It provides an overview of the strategic situation.

• It provides the “raw material” to do more extensive internal and external analysis.

Opportunities

• An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment.

• Possible Opportunities:

– Emerging customer needs– Quality Improvements– Expanding global markets– Vertical Integration

Threats• A THREAT is a factor in your

company’s external environment that poses a danger to its well-being.

• Possible Threats:

– New entry by competitors– Changing demographics/shifting

demand– Emergence of cheaper

technologies– Regulatory requirements

Opportunities and Threats form a basis for EXTERNAL analysis

• By examining opportunities:• you can discover untapped markets, • and new products or technologies, or identify

potential avenues for diversification.

• By examining threats, you can identify unfavorable market shifts or changes in technology, and create a defensive posture aimed at preserving your competitive position.

What to look for identifying a Company’s strengths, weaknesses, opportunities &

ThreatsPotential Resource Strengths & competitive capabilities:

A powerful strategyA strong financial conditionSuperior technologyCost advantage over rivalsStrong advertising & promotionProduct innovation capabilitiesGood customer service capabilitiesBetter product quality to rivalsWide geographical coverage /strong global distributionAlliances /joint ventures with other firms –provide access to valuable

technology ,competencies, & attractive geographic markets.


ThreatsPotential Resource WEAKNESSES & competitive DEFICIENCIES:

No clear strategic direction A weak balance sheetWeak R&DWeak Brand image or reputationLoosing market shareLack of Product innovation capabilitiesToo much underutilized plant capacityStrained relations –labor & managementObsolete technologyResources are not matched to industry key success

factors.

What to look for identifying a Company’s strengths,

weaknesses, opportunities & Threats

Potential Market OPPORTUNITIES:

Openings to win market share from rivalsSharp Rise in buyer demand for productExpanding into new geographic marketsIntegrating forward & backwardFalling trade barriers in attractive foreign

marketsAcquiring rival firms with attractive

technological know-how to enter new product lines

Entering into Alliances or joint ventures


ThreatsPotential External THREATS to a company’s well being: Slowdowns in market growth

Entry of potent new competitors Loss of sales to substitute products Growing bargaining power of customers

or suppliers Restrictive trade policies on the part of foreign

governments Increasing intensity of competition among

industry rivals- may squeeze profit margins.

Entering into Alliances or joint ventures

thought for the day the winner is always part of the answer: the loser is always part of the problem

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