GRAŻYNA LEŚNIAK-ŁEBKOWSKA (PH.D)
VALUE CREATING GROWTH
Based on
Th. Doorley III and J. Donovan „Value Creating Growth”, Jossey- Bass,1999;
G. Deans and F.Kroeger „STRECH !”, Wiley&Sons,2004
Ch.Zook, J. Allen „Profit from the core. Growth strategy in an era of turbulence”,
Bain&Co.2001
F. Kroeger, A. Vizjak, A. Kwiatkowski, Success in niches. 9 winning strategies to survive the
merger endgame, Wiley, 2006
A.Vizjak „Competing against scale. The growrh cube for scale based competition”, AT
Kearney, GV Zalozba, 2008
I. Jackson, J.Nelson „Profit with principles. Seven strategies for delivering value with values”,
Currency Doubleday, 2004
WARSAW SCHOOL OF ECONOMICS 2010
E-mail: lebkowska@wemba.edu.pl
mobile:+48 602 237 064
VALUE-BUILDING GROWTH
A COMPANY IS A VALUE BUILDER WHEN IT OUTPERFORMS ITS
PEERS BOTH IN REVENUE GROWTH AND IN THE CREATION OF
SHAREHOLDER VALUE.
What is and why the shareholder value relates to value-building
growth?
•
THE VALUE OF THE COMPANY IS WHAT THE MARKET WILL PAY FOR IT. IT
COULD BE MEASURED BY A COMPANY’S STOCK PRICE WITH SOME
ADJUSTMENTS FOR DIVIDENDS. (AMC: ADJUSTED MARKET CAPITALIZATION)
What drives value growth?
•
•
•
CURRENT EARNING STREAMS EXPLAIN AT MOST 20% OF A COMPANY
VALUE. THE REST IS ATTRIBUTABLE TO EXPECTED GROWTH OF PROFITS.
THE EXTENT OF THESE AS-YET-UNREALIZED PROFITS DEPENDS, IN TURN,
ON EXPECTED REVENUE GROWTH.
EXPECTED PROFIT GROWTH COULD ARISE PARTLY FROM COST CUTTING
BUT THERE IS LIMITED RATIONALITY IN COST CUTTING, IT MAY REFRAIN
GROWTH BY REDUCING THE GROWTH POTENTIAL.
UNLIKE GROWTH THROUGH COST CUTTING THE BOUNDARIES OF REVENUE
GROWTH ARE VIRTUALLY NONEXISTENT!
G .Leśniak - Łebkowska
CONSTRUCTING A SUSTAINABLE CYCLE OF
VALUE CREATION
Value creation
•Identification of opportunity
•Strategy formulation
•Operations
Rewards
•Total compensation
•Variable compensation
(incentive)
Measurement
•Free cash flow valuation
•Economic Value Added
•Cash flow return on investment
G.Leśniak-Łebkowska
COMPETING MODELS OF EQUITY VALUATION
Accounting
(Earnings) Model
Discounted Cash
Flow Model
Equity value
Price/earnings ratio Present value of
X Earnings per share future cash flows
Value drivers
Determinants of
accounting earnings
and the
price/earnings ratio
G.Leśniak-Łebkowska
Determinants of firm
future cash flows
and the opportunity
cost of capital
Examples of growth
creating or destroying value
If destroying value,
+
Failed market expansion
Poor acquisitions
(e.g. U.S. Airways)
Successful new product
rollouts
(e.g. Microsoft, Apple)
Profitable revenue
growth is well
rewarded by the
market and the
only sustainable
option in the long
run
RELEASING VALUE
Divestiture
(e.g. General Dynamics)
LIMITING VALUE
Improved productivity
(e.g. General Electric)
Increased asset
productivity
eventually levels
out
DESTROYING VALUE
Growth is exactly
INCREASING VALUE
The wrong strategy
-
-
0
Releasing
investment
(shrinking) is
unsustainable over
the long term
Cost-of-Capital
Return
Source: Braxton Analysis
G.Leśniak-Łebkowska
+
4 Sources of an enterprise value
OPTIMAL MARGINS
OPTIMAL USE OF
RESOURCES
REVENUE
GROWTH
MANAGEMENT OF
EXPECTATIONS
STRATEGIC PARADOX (DELOITTE@TOUCHE):
BOTH THE WINNERS AND LOSERS ADOPT A RADICAL TYPE OF STRATEGY BUT THE FIRST
BASED IT ON THE RIGHT SCENARIO OF EXPECTED CHANGE, THE SECOND ON THE WRONG
G.Leśniak-Łebkowska
ONE. EVEN IF SCENARIO X SEEMS TO BE
BETTER ONE HAVE TO BE PREPARED TO SWITCH
Thesis :
Companies with near-fanatical focus on growth
spectacularly outperform all others
• For shareholders high-growth companies generate 5-10 times the
returns of slow growth companies
• For customers high growth companies churn-out new products and
services at nearly twice the”normal” rate
• For employees high growth companies are the most satisfying
places to work and, incredibly, job satisfaction soars despite
enormous pressure to keep pace
• For the economy: a small number of high growth companies are
the job creating engines (in the 1995-99 a mere 200 companies,
i.e.less than 2% of all public companies created 32% of all jobs)
G.Leśniak-Łebkowska
A.T.KEARNEY RESEARCH EVIDENCE
• High-growth companies perform; they create value everywhere
that matters
From 2000 companies investigated in 1976-1996 only 1 in 7
sustained growth in 2 decades. From those that within the first
decade fell out of the top tier only 1 in 3 managed to regain its
high-growth status. So, once a company topples from the highgrowth zone, it’ll find it very difficult to regain its stride.
Besides to climb at the growth wall ($50billion in revenue/at 100
thousand employees) is extremely difficult (GE with Jack
Welch). The growth pace usually slows down with the growth of
employment and complexity of mgt system
• Growth is hard. It’s a daunting challenge that must be attacked
aggressively
G.Leśniak-Łebkowska
Takeway
Growth is a learned competence. Any and all can improve at it.
Three cornerstones of starting the GROWTH SYSTEM are needed:
 Deep commitment and belief that growth is central to value
creation
 Strategy based on Valuable Formula (understanding what
makes the products and services special and how this
evolves over time)
 Capability to sustain long-term growth (managing changes,
contingencies, and potentialities; organizations’ ability to
create, monitor and continually nurture five growthsupporting foundations
G.Leśniak-Łebkowska
Five foundations of the capability to grow
leadership
culture
Capability to grow
knowledge
architecture
processes
G.Leśniak-Łebkowska
Growth is a high-performance engine
Downseizing may lead to corporate anorexia!
Tab. Payoff in Market Value for Growth
Compustat, braxton associates analysis (N=3,895 companies)
high
Revenue
Growth
>15%
23%
34%
34%
38%
10-15%
15%
19%
21%
23%
5-10%
10%
14%
16%
17%
<5%
(1)%
5%
7%
15%
<$100m
$100m$1b
$1b-$10b
>$10b
low
Company
size by
revenue
G.Leśniak-Łebkowska
Introduction to
A.T.Kearney STRETCH model
for a company growth
• Growth is still the mantra and mission of every company (refer to
any company annual reports)
• The strategy and tactics for growth may change with every era, with
changes in exogenous factors, but they are always rooted in
daredevil strategy and solid execution
• 21st century companies have forgotten how to grow or are too riskaverse to make it happen
Graeme K.Deans
Fritz Kroeger
G.Leśniak-Łebkowska
THE POSSIBILITIES OF GROWTH
cont’d
MYTHS:
•
•
•
•
•
•
•
improving efficiency through cost reduction, reengineering, restructuring,
operational excellence
will reshape the company and foster growth
Moreover the above are low risk actions while radical growth initiatives are
always high risk operations
Exogenous factors dominate and unable direct control over the company
destiny
Growth happens in innovative industries, in some regions, at some phases
of a business cycle
High barriers to growth differentiate the company ability to growth
Companies do not have direct control over their stock prices, their value
depends on investors expectations based on short term performance and
optimistic/pessimistic expectations as to the future environment
Concentration ratio differs from industry to industry, some industriess are
slowly consolidating or unlikely to consolidate
G.Leśniak-Łebkowska
THE POSSIBILITIES OF GROWTH
based on A.T Kearney research on 29 thousand companies database encompassing 98% of world market
capitalization over the period of 10 years + 1 thousand interviews with CEOs during briefings, coverage of 24 major
industries in 34 countries plus more than 80 deep in-depth case studies
RESEARCH FINDINGS:
•
•
•
•
•
•
•
•
the endless pursuit of top-line growth, determined to exploit the company
potential to generate long-term shareholder value is the new-way of thinking
of top strategists
Growth is possible in any industry, any region,any phase of the business
cycle
Growth is driven predominantly by 8 internal drivers, covering soft and hard
factors, across operations, strategy and structure
Strategic innovation is only one of many growth levers, most growth
initiatives are low risk ones
The barriers to growth are different for every company, so their paths to
growth are equally unique
Long-term growth is the decisive driver of stock prices, thus companies are
in control of their own stock price destiny
All industry consolidation follows a similar pattern including 4 distinctive
stages:opening, scale, focus, balance & alliance
Successful long-term strategy must master growth initiatives in each stage
G.Leśniak-Łebkowska
THE A.T.KEARNEY GROWTH MATRIX
BASED ON RESERACH
• Q1 VALUE GROWERS
companies that outperform their peers in revenue and value
growth to achieve the dominant position
• Q2 PROFIT SEEKERS
companies that have above-average value growth but are
lagging behind in revenue growth
• Q3 SIMPLE GROWERS
companies that place a strong emphasis on revenue but don’t
deliver on the value axis
• Q4 UNDERPERFORMERS
companies that are underperforming in revenue and in value
growth
G.Leśniak-Łebkowska
THE A.T.KEARNEY GROWTH MATRIX
Q3
Q1
SIMPLE GROWERS
VALUE GROWERS
Q4
Q2
UNDERPERFORMERS
PROFIT SEEKERS
?
+
G.Leśniak-Łebkowska
Research findings cont’d
• Industry maturity vs mature management
• Strong and poor performers located in all
regions
• Strong growth happens in all business
cycle, not only during economic booms but
also in downturns
G.Leśniak-Łebkowska
FOUNDATIONS OF VALUE
•
•
•
•
THE RISE IN SHARE PRICE STRONGLY LINKED TO LONG-TERM GROWTH
AND NOT TO OTHER FINANCIAL INDICATORS LIKE ECONOMIC VALUE ADDED
(EVA), ECONOMIC EARNINGS(EE), CASH FLOW RETURN ON INVESTMENTS
(CFROI)
THE STRONG LONG-TERM CORRELATION EXISTS BETWEEN REVENUE
GROWTH AND SHAREHOLDER VALUE GROWTH
VALUE GROVERS EXECUTIVES SIGNIFICANTLY DIFFER FROM OTHERS IN
THEIR MIND-SET: THEY FOCUS ON INNOVATION (CONTINUOUS PRODUCT
IMPROVEMENT), RISK-TAKING (WHITE SPACE OPPORTUNITIES), AND
AGGRESSIVENESS (BUILDING SCALE GLOBALLY NOT ONLY ON FAMILIAR
MARKETS)
THE GROWTH IS ACHIEVED THROUGH A COMBINATION OF INTERNAL
(ORGANIC, INCREMENTAL) GROWTH AND EXTERNAL (M&A) GROWTH.
EXTERNAL GROWTH IS NOT BETTER OR FASTER. 87% OF GROWTH RESULTS
WERE DERIVED FROM INTERNAL ACTIVITIES, 13% FROM EXTERNAL
DRIVERS.
G.Leśniak-Łebkowska
THE MERGER ENDGAMES S-CURVE
based on research sample of 29 thousand companies
CR3=market share of three largest companies of the total market
HHi = Hirschman-Herfindahl Index: the sum of the squared market shares of all companies is greater than 90%, the
axis logaritmically plotted.
For all industries it takes apx. 25 years to commence,
deconsolidate, consolidate and balance out!
Speed consolidation does not differ much across industries!
In the history:
•
Shipyards: 4 000 years to enter the phase of ballance&alliance
•
automotive industry: over 100 years for to reach the end of
scale stage, and only more 10-13 to reach the next one.
G.Leśniak-Łebkowska
4 discrete stages on the way to inevitable
global consolidation
1.
2.
3.
4.
OPENING (little or no market concentration, first consolidations. Newly
deregulated, start-up, spin-off subsidaries). Examples: railway, telecom,
banks, insurance
SCALE (size begins to matter, major players emerge and lead
consolidation.Concentration ratio in some industries may reach 45%).
Examples: chemicals, airlines, utilities, automotive suppliers, restaurants,
fast food, pharmaceuticals, breweries, paper, steel
FOCUS (successful players extend their core businesses, exchange or
eliminate secondary units, continue to aggressively outgrow the
competition). Examples: automotiveOEMs, food, toys, rubber&tyre,
confection, truck&trailer
BALLANCE AND ALLIANCE (few players dominate, consolidation up to
90%, industry titans reign, from tobacco to automotive companies and
engine producers. Large companies may form alliances with other giants
to challenge the further growth). Examples: shipbuilders, distillers,
aerospace suppliers, defence, tobacco, automatic controls, shoes, soft
drinks
G.Leśniak-Łebkowska
BARRIERS TO GROWTH
in the opinions of 953 senior leaders investigated by A.T Kearney researchers during 1999-2003 period
•
•
•
•
•
•
•
•
STRATEGIC DEFICIENCY (28%)
ORGANIZATION&LEADERSHIP (26%)
OPERATIONAL&COMPETENCE GAPS (15%)
LACK OF CUSTOMER INTIMACY (11%)
UNATTRACTIVE REGULATORY ENVIRONMENT (9%)
ECONOMIC CYCLE –DOWNTURN ( 4%)
PRODUCT LIFECYCLE- DOWNWARD TREND (3%)
CULTURAL RESISTANCE (3%)
G.Leśniak-Łebkowska
THE STRETCH GROWTH MODEL
• OPERATIONS: clean-up, focus on dramatic improvements in
internal processes such as product development, sourcing,
quality, delivery, customer service, sales and pricing
• ORGANIZATION: changes in organizational design,
reconfiguration of value chain, adjustments in compensation,
rewards and incentive systems
• STRATEGY: reinventing, redesigning, reshaping the core
strategy and brand of the firm. Focusing on value proposition
offered to customers, brand stretch, line extention.
• STRETCH: expanding the business frontier, ventures into new
territories, breaking old barriers to create new products for new
markets, new customer bases, new geographies.
G.Leśniak-Łebkowska
CONT’D
• SUCCESSFUL COMPANIES APPLY SPECIFIC STRATEGIC AND
OPERATIONAL IMPERATIVES THAT ARE DIFFERENT FOR
EACH STAGE AND POSITION THEMSELVES AS VALUE
GROWERS
• RELATIVE WINNERS: EXXON, ALCOA, JOHN DEERE, DIAGEO,
PHILIP MORRIS, PROCTER&GAMBLE, GENERAL ELECTRIC,
PFIZER
• LESS SUCCESSFUL COMPANIES: BAYER, DEUTSCHE BANK,
GENERAL MOTORS, IBM, AT&T
G.Leśniak-Łebkowska
THE STRETCH GROWTH MODEL
OPERATIONS
REMOVE BOTTLENECKS
AND BARRIERS
CREATE HIGH
PERFORMING
EXPLOIT STRATEGIC
LEVERS
COMPANIES
G.Leśniak-Łebkowska
ACHIEVE
EXTRAORDINARY
GROWTH
PROFIT FROM THE CORE
Based on the book of Chris Zook with James Allen, Bain&Co.Inc., 2001
• After having examined and redesigned
operations and organization (doing things right)
you move to strategy and stretch choices (doing
right things)
• The paradox: the better performing of your
business units are likely to be those operating
the furthest below their full potential
• The stronger your core business, the more
opportunities you have both to move into
profitable adjacencies and to lose focus
G.Leśniak-Łebkowska
PROFIT FROM THE CORE CONT’D
• THE MANAGEMENT TEAMS THAT HAVE BEEN MOST
SUCCESSFUL IN BUILDING A STRONG CORE
BUSINESS AND THAT HAVE BENEFITED FROM
ADJACENCY EXPANSION ARE ALSO THE MOST
VULNERABLE TO INDUSTRY TURBULENCE
• STRATEGY-STRUCTURE RELATIONSHIPS ARE
VITAL IN SUCCESFUL SHIFTS
• FROM FOCUS COMES GROWTH; BY NARROWING
SCOPE ONE CREATES EXPANSION
G.Leśniak-Łebkowska
THREE MAIN ISSUES MANAGEMENT MUST
FACE IN SEEKING PROFIT FROM THE CORE
• BUILD MARKET POWER AND INFLUENCE IN THE
CORE BUSINESS OR IN A SEGMENT OF THAT
BUSINESS
• HAVING DONE THAT, EXPAND INTO LOGICAL
REINFORCING ADJACENCIES AROUND THE CORE
• SHIFT OR REDEFINE THE CORE IN RESPONSE TO
INDUSTRY TURBULENCE
G.Leśniak-Łebkowska
TO IDENTIFY YOUR CORE BUSINESS
FIRST IDENTIFY THE 5 ASSETS:
• YOUR MOST POTENTIALLY PROFITABLE,
FRANCHISE CUSTOMERS
• YOUR MOST DIFFERENTIATED AND STRATEGIC
CAPABILITIES
• YOUR MOST CRITICAL PRODUCT OFFERINGS
• YOUR MOST IMPORTANT CHANNELS
• ANY CRITICAL STRATEGIC ASSETS THAT
CONTRIBUTE TO THE ABOVE (E.G. PATENTS,
BRANDS, POSITION AT A CONTROL POINT IN A
NETWORK)
G.Leśniak-Łebkowska
BUSINESS DEFINING
•
•
•
•
•
WHAT ARE THE BOUNDARIES OF THE BUSINESS IN WHICH i
PARTICIPATE, WHERE THOSE BIUNDARIES ARE „NATURAL”
ECONOMIC BOUNDARIES DEFINED BY CUSTOMER NEEDS AND
BASIC ECONOMICS? WHAT PRODUCTS, CUSTOMERS, CHANNELS
AND COMPETITORS DO THESE BOUNDARIES ENCOMPASS?
WHAT ARE THE CORE SKILLS AND ASSETS NEEDED TO COMPLETE
EFFECTIVELY WITHIN THAT COMPATITIVE ARENA?
WHAT IS MY OWN CORE BUSINESS AS DEFINED BY THOSE CORE
CUSTOMERS, PRODUCTS, TECHNOLOGIES, AND CHANNELS
THROUGH WHICH I CAN EARN A RETURN TODAY AND CAN
COMPETE EFFECTIVELY WITH MY CURRENT RESOURCES?
WHAT IS THE KEY DIFFERENTIATING FACTOR THAT MAKES ME
UNIQUE TO MY CORE CUSTOMERS?
WHAT ARE THE ADJACENT AREAS AROUND MY CORE, AND ARE THE
DEFINITIONS OF MY BUSINESS AND MY INDUSTRY LIKELY TO SHIFT,
CHANGING THE COMPETITIVE AND CUSTOMER LANDSCAPE?
G.Leśniak-Łebkowska
THE POWER ON FOCUSING ON THE
CORE
• MOST COMPANIES SUSTAINING THE VALUE CREATION
POSSESS ONLY ONE OR TWO STRONG CORES
• PRIVATE EQUITY COMPANIES OFTEN ACHIEVE THEIR
GREATEST SUCCESS BY BUYING ORPHAN BUSINESSES
FROM DIFFUSE CONGLOMERATES, THEREBY CREATING
FOCUS
• SPIN-OFFS USUALLY CREATE BOTH FOCUS AND VALUE
• DIVERSIFICATION IS ASSOCIATED WITH LOWER AVERAGE
VALUATIONS THAN ARE TYPICAL OF COMPANIES WITH
FOCUSED CORES
• THE FEW COMPANIES THAT BECAME SMALLER AND STILL
CREATED VALUE ARE THOSE THAT RESTRUCTURED TO
FOCUS ON A STRONG CORE, OFTEN EVENTUALLY TO
TURBOCHARGE THEIR GROWTH AGAIN
G.Leśniak-Łebkowska
KEY TRENDS
IN BLURRING OF BOUNDARIES AND CREATION OF
LARGER ARENAS OF RELEVANCE STRATEGICALLY
AROUND THE CORE
• OUTSOURCING AND THE DISINTEGRATION OF TRADITIONAL
VALUE CHAINS
• INCREASED CUSTOMER MICROSEGMENTATION AND NEW,
MORE NARROWLY FOCUSED COMPETITORS
• INCREASED COMPETITION AMONG DIFFERENT BUSINESS
MODELS RATHER THAN MERELY AMONG VESRSIONS OF THE
SAME ONE
• DIGITAL CONVERGENCE BLURRING THE BOUNDARIES
BETWEEN ALL INFORMATION BUSINESSES
• FORCES OF GLOBALIZATION BLURRING REGIONAL
GEOGRAPHIC BOUNDARIES
• INCREASINGLY SOPHISTICATED SUPPLY CHAIN STRATEIES
CAUSING COMPETITION BETWEEN SUPPLY CHAINS AS MUCH
AS BETWEEN COMPANIES
G.Leśniak-Łebkowska
KEY TYPES OF DECISIONS:
• THE CORE OR NONCORE AREA (GRAY AREA, BLURRING
BOUNDARIES). Defining the area as noncore is as valuable as
defining it as the core one. By taking the competitive arena off the
agenda you focus the organization, liberate attention and resources
for most important battles
• WITHOUT SUCH FOCUS organizations inherently tend to add
segments and priorities. This is an especially costly tendency in
successful businesses with a growing number of possible paths
before them
G.Leśniak-Łebkowska
MAJOR GRAY AREAS
• Do I need to expand my definition to include a new segment or
technology? If so, do I need to add it? If so, how?
• Are any of the competitive dynamics in the gray area likely to affect
the profit pool in my core business? If so, how, and how should I
react?
• Are any of the competitors that are not currently threatening likely to
make incursions into my core customers? If so, what should I do?
• Are there capabilities or types of skills that I need to bring inhouse
now to be able to understand and, therefore, anticipate, some of the
dynamics adjacent to my curent core?
• Are there partnerships or alliances I should forge to insulate and
stabilize my economic position surrounding my core?
G.Leśniak-Łebkowska
Underestimation of the growth potential from
the core
• Leads to underinvestments in the
profitable core
• Setting the performance targets too low
thus leading to undermanagement
• Abandoning the core prematurely for
seemingly greener pastures
G.Leśniak-Łebkowska
TYPICAL UNDERESTIMATION OF THE
CORE DIMENSIONS
• INCREASING THE RETURNS TO LEADERSHIP,
LEADING TO HIGHER PROFITS (MARKET
LEADERSHIP DRIVES INCREASING RETURNS)
• INFLUENCE OVER INVESTABLE FUNDS, LEADING
TO COMPETITIVE ADVANTAGE
• INFLUENCE OVER THE EXTENDED INDUSTRY
PROFIT POOL, LEADING TO ACCESS TO SUPERIOR
PROFIT GROWTH OPPORTUNITIES IN ADJACENT
BUSINESSES
G.Leśniak-Łebkowska
HOW COMPANIES ACQUIRE MARKET
POWER AND INFLUENCE
CUSTOMERBASED
CHANNELBASED
PRODUCT- OR
CAPABILITYBASED
CAPITALBASED
•Superior service
and relationship
(loyalty)
•High switching
costs
•Superior
information on
behavior/needs
•Business model
built around new
segment
•Channel
dominance
•Partnership with
leading channel
participants
•Control point in a
network
•Low-cost
production
•Superior/unique
features
•New-to-world
products
•Patents
•Deep share of
wallet
•High valuation,
creating acquisition
currency
•Capital availability,
allowing companies
to outinvest
competitors
G.Leśniak-Łebkowska
THE ALCHEMY OF GROWTH: staircases and horizons
M.Baghai,S.Coley, D.White/McKinsey Co.
Manage for
Replicate proven profitability
business model
Test business
model
Seed growth
options
Horizon 3
Create viable
option
Build emerging
business
Horizon 2
Extend and defend
Core businesses
Horizon 1
G.Leśniak-Łebkowska
Success in niches. 9 winning strategies
to survive the merger endgame
• Research base: 32 thousand global value
building growth companies publickly
quoted + 660 thousand worldwide
companies non quoted
• Period: 1990-2005
G.Leśniak-Łebkowska
Consolidation scheme theses:
• Global consolidation endgame is inevitable
and endangers all companies except from
3-4 liders of a specific market
• Nichers are also endangered except from
those 3-4 on each market who managed
to build global competitive advantage in a
niche
• 80% of all plyers are the potential or
already designated losers
G.Leśniak-Łebkowska
Global market structure at the
endgame
• Only 60 000 potential leaders of the global
market: 50% quoted companies + 50%
nichers
• 600 000 „victims”
G.Leśniak-Łebkowska
9 winning niches: 270 players
sustaining VBG in all stages
•Regional niches
•Targeted clients oriented (BMW, Four Seasons Hotels)
•Specific product oriented +know how (Semperit)
•Brand oriented (Porsche, Montblanc)
•Speed consolidation leaders (Mittal Steel)
•Innovation leaders (Logitec, Apple)
•Cooperation consortia (KPMG)
•Market fragmenters (IBM in concentrated IT, now service IT
(EDS), PC (HP, Dell), Software (SAP, Microsoft), integrated
circuits( Intel, AMD)
•Contra-nichers (complementing the strategic profile of leaders
(Karmann, Tuesday Morning Shops, United Drugs)
G.Leśniak-Łebkowska
Right time for specific niche
•
•
•
•
•
•
•
•
•
1. opening-scale
2. opening-focus
3. late opening-late focus
4. scale-focus
5. scale-early balance&alliance
6. scale- early balance&alliance
7. Scale-balance_alliance
8. mid scale – endgame
9. focus-balance&alliance
G.Leśniak-Łebkowska
Theses cont’d
• Endgame niches are to be distinguished
according to consolidation stages
• Building consolidation endgame niches
requires deep understanding of the merger
endgame conduct - specific for each
industry
• Window of opportunity shuts down –
niches should be harvested or sold out
G.Leśniak-Łebkowska
3 components
of a prosperous niche differentiating it
from a market leader
• Market segment
• Value creation chain (base costs+segment
costs)
• Complexity: diversity, dynamics,
innovativeness
G.Leśniak-Łebkowska
Useful ideas
• Each industry has its point of gravity,
where every 9 types of niche companies
are mostly located
• Combinations/mixed forms are better to
defend against leaders
• Bravety and great ideas how to use the
company unique potential help to survive
G.Leśniak-Łebkowska