PRODUCTION MANAGEMENT
STRATEGIC MANAGEMENT
Jan Skonieczny
Introduction to
Strategic Management
Development phases of strategic management
MAIN PROBLEM
PATTERN OF SOLUTION
Managing high skilled staff
1990
Matching to environment
1980
Strategic orientation
1970
Market demands
1960
Presence vs. future
Cost orientation
Quantity approach
Source: [M. Moszkowicz, 2000, p. 27]
1955
1950
?
Strategic management
Strategy / Strategic plans
Marketing / Sales
Controlling / Organizational planning
Cost accounting / Economic
Rationalization / Organization
Evolution of strategic management
Source: S. Hollensen, 2003
Strategic Management
Attribute
Boundary of
environment
Industrial (1900-1950s)
•Around commercial
activity of the
organisation
•Stable
•Well-defined
•Non-permeable
•Few different types
of actors
Environment
segmented into
industries
•Influences among
actors laterally direct
•Firm the center of
power
Common shares
knowledge
Post-Industrial (1950s- )
•Includes commercial
sociopolitical activity
•Changing
•Value
•Permeable to new
influences
•Many different types
of actors
•Industry lines
indistinct
•Direct and indirect
influences
•Centers of power in
political bodies
•Many foci of
privileged knowledge
Source: H. Ansoff, 1984
Strategic Management
Dynamics of
environment
•Environmental change
generated by the
organisation
•Few surprises
Technology, markets,
continuously evolving
Occasional discontinuities
Prior experience applicable
to new situations
•Change generated both
inside organisation and
outside environment by
many sources
•Many surprises
Discontinuous changes
frequent in market structure,
technology, government
relations.
•Prior experience
inapplicable to new situations
Source: H.
Ansoff,
1984
Characteristics of strategic management
and operational management
Definition of strategic management
Strategic management is a total management
concept, which in the face of a turbulent environment
is able to creative adaptation. This concept defends
negative outside trends and creates effective
competitive advantages, which enable the realization
of an enterprise's aims
Source: [M. Moszkowicz, 2005]
Levels and strategic areas at general models of strategy
CORPORATE STRATEGY
Financial
STRATEGIC FUNCTIONAL
AREA
Problems:
Detailing strategy for all strategic
functional areas
Marketing
Problems:
a)Choosing pattern of relation with environment
b)Choosing activity area and configuration the strategic
business units
c)Separate resources for selected strategic business units
R+D
Top
management
Production
STRATEGIC BUSINESS UNITS (SBU)
(strategy – business strategy)
Problems:
How to win competition on SBU’s market
area
Source: [M. Moszkowicz 2005]
other
SBU C
SBU A
SBU B
Criteria of selecting strategic business units
Criteria of selecting strategic business units
1.
SBU has its own clients
2.
SBU has its own competitors
3.
Decisions independence
4.
Separated finance - can be calculated as centre of incomes dna costs
5.
Sometimes  Investment independence
Source: [M. Moszkowicz, 2005]
Three levels of strategy
Corporate Strategy part 1
Strategy level
Decisions covered
Corporate
·
·
·
·
·
Purpose
Direction
Long-range goals
Business definition
Value creation for
Customers
Examples of application at
Unilever
To achieve sustainable,
profitable growth and create
long-term value for
consumers, shareholders,
employees
Growth
5-6% annual growth
Consumer goods
·
Brand-name, quality
products that meet and
anticipate everyday customer
needs
·
·
·
·
Three levels of strategy
Business strategy part 2
Business
(implementing
corporate strategy)
·
Unit scope
·
Competitive approach
·
Markets served
·
Allocation of resources
for value
Foods, home and personal
care divisions
·
Leverage brands for market
leadership in high-demand
product categories
·
Build relationships with
consumers in Europe, Asia, the
Americas, other markets
·
·
Emphasise research and
development to meet emerging
consumer needs
Three levels of strategy
Functional strategy part 3
·
Marketing
(implementing
business strategy,
supporting
corporate
strategy)
Product strategy
·
Pricing strategy
·
Channel/logistics
(distribution) strategy
·
Integrated marketing
communication (promotion)
strategy
·
·
Service
Internal marketing
Reinforce brand names
in chosen categories (such
as Magnum ice cream,
Knorr soup)
·
Offer quality and value
·
Reach consumers
through food wholesalers,
retailers, restaurants, hotels
·
Build brands
through media advertising,
online presence and various
other techniques
·
Fill channel orders
completely, on time
·
Build commitment
and cooperation for
marketing through ongoing
communication and
meetings.
Source: M.
Wood, 2004
Information
Need
Categories
for a
Business or
Business Unit
Main differences between the resource-based
view and the market orientation view part 1
Market orientation
view (MOV)
Resource-based view
(RBV)
Basic principle
Adapt firm’s resources
to the requirements of
its competitive
environment, i.e. to key
success factors
Pro-active quest for
environments that allow
the best exploitation of
the firm’s resources
Strategic analysis
Centred on infustry
structure and market
attributes
Emphasis on internal
diagnosis
Formulation process
Outside-in
Inside-out
Source competitive
edge
Market positioning in
relation to local
competitive environment
Firm’s idiosyncratic set
of resources and
competences
Main differences between the resource-based
view and the market orientation view part 2
Examples:
Lipparini and Fratocchi
(1999)
Tetra Pak
The Swedish company Tetra Pak
develops, manufactures and markets
complete packaging system for liquid
and semi-liquid foods as well as
equipment required for their distribution.
The Tetra Pak architecture is derived
form, and based on, relationships. The
relational aspects that the company
considered when it set up a production
activity in a given country mainly
concerned customer companies or
governments. Even today, Tetra Pak
seeks to become part of local culture,
rapidly acquiring a network identity
which is the direct result of its relational
capability.
Ikea
Ikea, the world’s biggest home
furniture manufacturer, is an
example of how value can be
created by renouncing a number of
activities in the value chain and
focusing on its own
resources/competences and on
relations with customers and
suppliers. The Ikea formula
comprises high quality design, a
global sourcing system, products
that the customers take home and
assemble, and sales outlets that are
also entertainment and service
points.
Main differences between the resource-based
view and the market orientation view part 3
Market-orientation leads to location of
production activities where the need for a
given product arises, for example, the
creation of a paper-processing facility in
Brazil after verifying the demand for its
packaging systems at potential customers,
e.g. producers of liquid foods. Its
customers in Brazil would like to be close
to the Tetra Pak processing plant because
the logistics function is a critical factor in
continuity of supplies, given that the
customers must necessarily use Tetra Pak
material for their machines. IT links with its
packaging material stocks enable Tetra
Pak to predict the re-order point and
adjust production of the nearest paperprocessing facility.
cost savings generated by outsourcing
activities like assembly and delivery allow the
company to charge lower prices than its
competitors. The company has approximately
2000 suppliers in over 50 countries, and 30
purchasing centres worldwide have the task of
seeking out suppliers able to fit into its value
system with good-quality, low-cost products.
The final decision is taken by designers in
Sweden, where Ikea’s operational HQ is
located. Suitable computerized international
coordination and support structures help
suppliers source raw materials on the best
terms. See also Figure 2.6 for an illustration of
IKEA’s business system.
Source: S. Hollensen, 2003, p. 39
The resouce-based view versus market
Source: S.
Hollensen, 2003
Product-Oriented Versus Market-Oriented
Definitions of a Business
Company
Revelon
Missouri-Pacific
Railload
Xerox
International Minerals and Chemicals
Standard Oil
Columbia Pictures
Encyclopedia Britannica
Carrier
Product-Oriented
Definition
We make cosmetics.
We run a railroad.
Market-Oriented Definition
We make copying
ecqupment
We sell fertilizer.
We help improve office productivity
We sell gasoline.
We make movies.
We sell encyclopedias.
We make air conditioners and furnaces.
We supply energy.
We market entertainment.
We are in the informationproduction-and-distribution business.
We provide a comfortable climate in
the home.
Source: P. Kotler, 1991
We sell hope.
We are people-and-goods mover.
We help improve agricultural productivity.
The leading edge of strategy- fit or stretch
Main elements
of strategic
management
The Strategic Planning. Implementation,
and Control Process
The corporate Strategic-Planning Process
The Business Strategic-Planning Process
Organisation Mission
& Objectives
The vocabulary of strategy
British Airways
and the
vocabulary of
strategy
Identity – Mix
•
Corporate Personality
•
Understanding
the
enterprise
status, its aims, economical and
social function.
•
Corporate Behavior
•
The most important enterprise
dimension is estimated by its
behavior.
•
Corporate Disign
•
•
A Trade mark building shape and
graphical form of documents.
Corporate Communication
•
Flexible identity forming in short
and medium periods
Source: [M. Moszkowicz, 2005]
Elements of organizational culture
1.
2.
3.
4.
5.
6.
System of organization essentials – needs, attitudes, preferences
Organizational norms – legal or rules
Style of management
Myths
Customs and behavior rituals – focused on clients
Organizational language – verbal communication
Source: [M. Moszkowicz, 2005]
Enterprise communications
IDENTITY
TOŻSAMOŚĆ
PERSONALITY
OSOBOWOŚĆ
FILOZOFIA
Philosophy
KULTURA
Culture
WIZJA
MISJA statement
Mission
MIX IDENTITY
IMAGE
IMAGE
REPUTATION
WIZERUNEK
REPUTACJA
Reputation
Source: [M. Moszkowicz, 2005]
Definition of mission statement
Mission statement is a synthesis – in an
environment reality – a business concept
M. Moszkowicz, 2005
Examples of mission statement
1. Democratize the computer – APPLE
2. Speed and cheap – McDonald’s
3. Comfortable attendance of clients - Mariott
4. Fulfill the customers’ needs of electricity and heat energy –
energy sector firm
5. We supply heat energy to customers’ houses – energy sector
firm
Source: [M. Moszkowicz, 2005]
Definition of Business along Three Dimensions; Full
Function, Broad Scope, and Computer Manufacturer
Utilizing Existing Technology
Source: S. Abell
Definition of Business along Three Dimensions; Full
Function, Limited Customer Group, and Computer
Manufacturer Utilizing Existing Technology
Source: S. Abell
Definition of Business along Three Dimensions; Full
Function, Limited Customer, and Computer
Manufacturer Utilizing Existing Technology
Source: S. Abell
Definition of Business along Three Dimensions; Limited
Function, Broad Scope, and Peripheral Manufacturer
Utilizing Existing Technology
Source: D. Abell
Definition of Business along Three Dimensions; Limited
Function, Limited Customer Group, and Peripheral
Manufacturer Utilizing Existing Technology
Source: S. Abell
Targed
Definition of
Business
Financial objectives part 1
Focus of financial objective
Purpose and examples
External results
To provide targets for outcomes of
marketing activities such as:
Increasing unit or monetary sales by
geographic market
Increasing unit or monetary sales by
customer segment
Increasing unit or monetary sales by
product
Increasing unit or monetary sales by
channel
Other objectives
Source: M. Wood, 2004
Financial objectives part 2
Internal requirements
To provide targets for managing
marketing to meet organisational
requirements such as:
Achieving breakeven status
Achieving profiability levels
Achieving return on investment levels
Other objectives
Source: M. Wood, 2004
Marketing objectives
Focus of marketing objective
Purpose and examples
External relationships
To provide targets for managing relations with customers and
other stakeholders such as:
Enhancing brand, product, company
image
Building brand awareness and preference
Stimulating product trial
Acquiring new customers
Retaining existing customers
Increasing customer satisfaction
Acquiring of defending market share
Expanding or defending distribution
Other relationship objectives
Internal activities
To provide targets for managing specific marketing activities
such as:
Increasing output or speed of new product development
Improving product quality
Streamlining order fulfilment
Managing resources to enter new markets or segments
Conducting marketing research
Other objectives
Source: M. Wood , 2004
Marketing In Practise: Proceter & Gamble
•
Proceter & Gamble’s Pampers brand has long battled its arch-rival Kimberly-Clark’s Huggies
brand for a share of the US nappy market. In monetary terms, Huggies is the share leader,
holding nearly 45 per cent of the US market. A few years ago, when Pamper’s market share
was hovering under 35 per cent and overall market growth seemes limited, its marketers
decided on more aggressive share objectives. At the time, Kimberly-Clark was reducing the
number of nappies in each Huggies pack-age – and lowering prices slightly – to stimulate
sales and profits.
Pampers’ marketers cut pries but not the number of nappies per package and in
pursuit of higher market share, began emphasising this adventage in splashy new
promotions. They intensified the pressure even further by increasing the value of discount
coupons and adding the word ‘Compare’ to Pampers packages. The plan worked: Pampers
gained market share even as Huggies lost some ground. The following year, with financial
objectives in mind, Pampers’ marketers followed Kimberly-Clark’s lead and reduced the
number of nappies per package.
Source: M. Wood, 2004
Societal objectives part 1
Forces of societal objective
Purpose and examples
Ecological protection
To provide targets for managing
marketing related to ecological
protection and sustainability:
Reducing pollution with natural or
‘greener’ products, ecologically friendly
processes
Doing business with ‘greener’ supplier’s
and channel members
Reducing waste by redesigning products
and processes for recycling, other
efficiencies
Conserving use of natural resources
Other objectives
Source: M.
Wood, 2004
Societal objectives part 2
Social responsibility and stakeholder
relations
To provide targets for managing
marketing related to social responsibility
and stakeholder relations:
Building a positive image as a good
corporate citizen
Sopporting designated charities,
community projects, human rights
groups and other, with money and
marketing
Encouraging volunteering among
employees, customers, suppliers,
channel members
Communicating with stakeholders to
understand their concers and explain
societal activities
Other objectives
Source: M.
Wood, 2004
Business Mission Statements
Humana, Inc.
The mission of Humana is to achieve an unequaled
level of measurable quality and productivity in the
delivery of health services that are responsive to the
needs and values of patients, physicians, employers,
and employees.
Our strategy is twofold: We insit upon excellence and
productivity, and we are creating an
integrated
Source:
H. Bartletthealth
care system while exploring new services that address
the needs and values of our customers.
H.C. Barlett, 1988
General Electric Company
General Electric has identified 15 major businesses that
are leaders in their markets today and that represent GE’s
best opportunities to remain a world leader in the 1900s.
we have grouped these businesses into three circlescore, high technology, and services-and surrounded them
with three support operations that are helping our 15
major businesses in their drive for continuing world
leadership.
Source: H. C. Bartlett, 1988
McDonald’s Corporation
McDonald’s Corporation is the largest foodservice organization
in the world. The Company, its franchisees and affiliates
operate more then 7,200 McDonald’s restaurants, each
serving a limited menu of high-quality moderately priced food.
The restaurants are located in all 50 of the United States, the
District of Columbia, and internationally in 30 other countries
and territories. In its 28-year history, the Company has
pioneered foodservice technology, marketing techniques, and
operational systems that are now the standards of its industry.
The McDonald’s motto of Q.S.C.&V. translates into Quality
food product; efficient, friendly Service; and restaurants
renowned for the Cleanliness and Value they provide.
Q.S.C.&V…. McDonald’s promise to people around the world.
Source: H.C. Bartlett, 1988
James River Corporation
James River Corporation, headquartered on the banks of the James River in
Richmond, Virginia. Is a major integrated manufacturer and converter of paper
and paper-related products, including pulp, and a manufacturer of certain plastic
products and coated film. Through its subsidiaries, the Company processes
basic raw materials-wood, wood pulp, synthetic fibers and plastic resins-into
finished products such as towel and tissue papers, disposable food and
beverage service items and folding cartons, as well as a wide array of
communication papers and specialty industrial and packaging papers.
During its 17-year story history, the Company has pursued an acquisition and
operating strategy which has significantly expanded its business and the
diversity of its products.
As of April 27, 1986, James River had 23,000 employees working in 75
manufacturing facilities located in 24 states, Canada, and the United Kingdom.
With the subsequent acquisitions of Crown Zellerbach, Canada Cup and HandiKup, The Company today is made up of 36,00 employees in 111 manufacturing
facilities in 28 states, Canada, and the United Kingdom.
Source: H. C. Bartlett, 1988
Carson Pirie Scott & Company
Through innovative management and highly motivated
employees, we will achieve leadership in service and
financial results. Emphasis will be placed on customer
satisfaction in the retailing, food service, lodging, and
distribution fields.
Source: H.C. Bartlett, 1988
Strategies Objectives
General Motors Corporation
•Retain leadership in the worldwide automobile
industry by producing high-quality, high-value
products in the variety that customers demand.
•Remain a significant force in related key industries
•Continue as a high-technology enterprise
sustaining a competitive edge into the 21st century.
•Assure stockholders an attractive return as a basic
of their continuing support of GM’s progress and
objectives.
Source: H.C. Bartlett, 1988
Carson Pirie Scott & Company
•Achieve by 1988 a 16 percent return on equity,
sales of $1.7 billion, and a strong balance sheet.
•Achieve customer satisfaction by providing quality
products and services at a fair price.
•Provide our employees with a work environment
that encourages their involvement and
participation, and also is conducive to greater
productivity.
•To be a responsible member of the communities in
which we do business.
Source: H.C. Bartlett, 1988
Kemper Group
•To provide insurance and financial services and
products that are responsive to the needs of
present and prospective customers and are
competitive in price.
•Over any five-year period, to achieve an increase
in after-tax earnings greater then the average of
our principal competitors, while at the same time
increasing our share of market.
•To invest assets at the highest net return
consistent with maintaining financial resources
sufficient to meet our obligations under all
foreseeable circumstances.
•To conduct all of your activities in an ethical, lawful
and responsible manner.
Source: H.C.
Bartlett, 1988
Some guidelines for establishing strategic
objectives in organizations. These are
outlined below:
1.
Strategic objectives should strongly correlate with and facilitate the attainment
of business mission.
2. Strategic objectives should be compatible with the philosophy and culture of the
business
3. Strategic objectives should be aggressive but attainable over a period of time.
Objectives or goals that are either too high or too low will not motivate
individuals. Ideally, strategic objectives should require work and imagination to
attain them.
4. Strategic objectives should be determined through discussion and negotiation among
individuals at various levels of the organization.
5. Strategic objectives should be understood by all members of the organization,
especially those who have to lead that organization toward the attainment of those
objectives.
6. Strategic objectives should become more specific as they are developed into
operational objectives and goals at the operating levels of the organization. They should
be measurable and quantifiable wherever possible. Target dates for attainment should
be specified.
7. Strategic objectives should conform to ethical and social codes accepted by society
and the business.
Source: J. Pearce & R. Robinson
Self-Actualization
Needs
(self-development
and realization)
A
Maslow's
Hierarchy
of Needs
Esteem Needs
(self-esteem, recognition, status)
Social Needs
(sense of belonging love)
Safety Needs
(security, protection)
Safety Needs
(security, protection)
Physiological Needs
(hunger, thirst)
Source: P. Kotler, 1991
External/ Environmental
Analysis
Functional analyze of enterprise
MARKETING FUNCTION
-Market share
-Product concept
-Set (combination) of product
-Products quality
-Price of product
PERSONAL FUNCTION
-Staff fluctuation
-Staff recruitment
-Motivation system
FINACIAL FUNCTION
-Net profits
-Level of debts
-Level of investment capitals
PRODUCTION AND LOGISTIC FUNCTION
-Production capacity
-Limitations of production
-Production costs
-Automatisation
INNOVATIVE FUNCTION
-Type and scope of leading researches
-Technology (modern or not modern)
-Capacity for leading research
MANAGMENT QUALITY CONTROL
-Efficiency of strategic management
-Efficiency of information system
-Efficiency of cost analysis
Source: [J. Skonieczny, 2005]
Estimation the enterprise resources
Estimation
Criteria
Proftability
Credit ability
Technical conditions of buildings
Motivation systems
Interpersonal relations
Organizational structure
Quality standards
Source: [P. Kubiński, 2005]
1
2
3
4
5
6
7
Idea of core competencies
Products
STRATEGIC
BUSINESS UNIT 1
STRATEGIC
BUSINESS UNIT 2
Core
competence 1
Source: [P. Kubiński, 2005]
STRATEGIC
BUSINESS UNIT 3
Core
competence 2
STRATEGIC
BUSINESS UNIT 4
From resources to core competitions
Selected resources
Contracts
License
Trade secrets
Intellectual properties
Trade marks
Patents
Competencies of competitive advantage
Legal
Data base
Products fame (renown)
Enterprise reputation
Relations
Configuration of value chain
Distribution system
Positional
Know-how:
Staff
Suppliers
Distributors
Functional
Attitude to:
Quality
Service
Capacity for management of change
Capacity for innovation
Capacity for team work
Source: [M. Moszkowicz, 2005]
Elements and attributes
of final product
Cultural
Selected methods of environment analysis
Macroenvironment analysis
•Experts opinion
•Trends extrapolation
•Scenarios
•Simulation models
•Brainstorm
•Strategic gap analysis
Source: [J. Skonieczny, A. Świda, 2005]
Task (sector) environment
•Five forces analysis
•Pointing analysis of a sector
•Strategic group map
•Experience curve
Scenario methods
Scenario methods – Stimulate a firm’s management to forecast different events
and their influences on an organization. Main four types of scenarios:
1) Scenarios of probable events – Creating a list of possible future events
which could be important for an organization.
2) Simulation scenarios – Estimation of potential strategic choices and their
future environment relations.
3) Scenarios of environment conditions – Estimation of a potential influence of
separated environment elements on an enterprise and its probability to
happen.
4) Scenarios of environment tendencies (processes) – Focused on most
important tendencies which can strongly impact on an enterprise.
Source: [A. Świda, 2005]
Analyze of strategic gap
Strategic gap analysis – Process of estimating existing strategy and
organizing a business model for future environment requirements. That
gap analysis creates ways to equal differences among organizational
targets and expectations.
Operational gap – Weak utilization (usage) of firm’s resources performance.
Strategic gap analysis – Diagnostic methods which can estimate
organizational adaptive skills to environment trends.
Source: [M. Moszkowicz, 2005]
Selected methods of environment analysis
Macro environment analysis
•Experts opinion
•Trends extrapolation
•Scenarios
•Simulation models
•Brainstorm
•Strategic gap analysis
Source: [J. Skonieczny, A. Świda, 2005]
Task (sector) environment
•Five forces analysis
•Pointing analysis of a sector
•Strategic group map
•Experience curve
Methods of Environmental Forecasting
1.Expert opinion
2.Trend extrapolation
3.Trend correlation
4.Dynamic modeling
5.Cross-impact analysis
6.Multiple scenarios
7.Demand/hazard forecasting
Source: J. Bright&M. Schoeman.
Environment analysis and stakeholders analysis
Segmentation:
• General environment segmentation
Economy
Society
Demography
FIRM
Politics and
legal area
Technology
• Analysis of strategic interest group
STAKEHOLDER ANALYSIS
Source: [J. Skonieczny, 2005]
Stakeholders groups at enterprise environment
Groups that poses low Groups that poses
influence on
high influence on
enterprise
enterprise
Groups strongly
interested in
enterprise
Groups weakly
interested in
enterprise activities
Source: [J. Skonieczny, 2005]
Active
spectators
Gamblers
(speculators)
Mob
Arbiters
Methods of Environmental Forecasting
1. Expert opinion.Knowledgeable people are selected and
asked to assign importance and probability ratings to various
possible future developments. The most refined version, the
Delphi method, puts experts through several rounds of
event assessment, where the keep refining their
assumptions and judgments.
Source: S.C. Certo & J.P. Peter, 1988, s. 50
Methods of Environmental Forecasting
2. Trend extrapolation. Researchers fit best-fitting
curves (linear, quadratic, or S-shaped growth curves)
through past time series to serve as a basis for
extrapolation. This method can be very unreliable in
that new developments can completely alter the
expected direction of movement.
Source: Source: S.C. Certo & J.P. Peter, 1988, s. 50
Methods of Environmental Forecasting
3. Trend correlation. Researchers correlate various time
series in the hope of identifying leading and lagging
relationships that can be used for forecasting.
Source: S.C. Certo & J.P. Peter, 1988, s. 50
Methods of Environmental Forecasting
4. Dynamic modeling. Researchers build sets of
equations that attempt to describe the underlying
system. The coefficients in the equations are fitted
through statistical means. Econometric models of
more than three hundred equations, for example,
are used to forecast changes un the U.S. economy.
Source: Source: S.C. Certo & J.P. Peter, 1988, s. 50
Methods of Environmental Forecasting
5.Cross-impact analysis. Researchers identify a set of
key trends (those high in importance and/or
probability). The question is then put: “If sent A
occurs, what will be the impact on all other trends?”
The results are then used to build sets of “domino
chains,” with one event triggering others.
Source: J. Bright&M. Schoeman.
Methods of Environmental Forecasting
6.Multiple scenarios. Researchers build pictures
of alternative futures, each internally
consistent and with a certain probability of
happening. The major purpose of the
scenarios is to stimulate contingency planning.
Source: J. Bright&M. Schoeman.
Methods of Environmental Forecasting
7. Demand/hazard forecasting. Researchers identify
major events that would greatly affect the firm. Each
event is rated for its convergence with several major
trends taking place in society and for its appeal to
each major public group in the society. The higher
the event’s convergence and appeal, the higher its
probability of occurring. The highnest-scoring events
are then researched further.
Source: S.C. Certo & J.P. Peter, 1988, s. 50
Types of Competition and Expected Firm
Performance
Type of
Competition
Perfect
competition
Attributes
Large number of
firms
Homogeneous
product
Low-cost entry
and exit
Examples
Stock market
Crude oil
Expected
Firm
Performance
Competitive
Parity
Source: J.
Barney &
W. Hesterly,
2006
Types of Competition and Expected Firm
Performance
Monopolistic
Competition
Large
number of
firms
Heterogeneous
products
Low-cost
entry and exit
Toothpaste
Shampoo
Golf balls
Automobiles
Competitive
Advantage
Oligopoly
Small
number of
firms
Homogeneus
products
Costly entry
and exit
U.S steel and
autos in the
1950s
U.S.
breakfast
cereal
Competitive
Advantage
Monopoly
One firm
Costly entry
Home mail
delivery
Competitive
Advantage
Major trends of an environment
1.
2.
Growth of the novelty of change. They important events
which affect the organisation is progressively disconnected
from past experience. We have discussed this phenomenon
in detail in the preceding pages;
Growth in the intensity of the environment. The
maintenance of linkages between the organisation and its
correspondents consumes a growing percentage of energy,
resources, and managerial attention. We shall devote the
following chapter to analysis of strategic intensity;
Source: H. Ansoff, 1984
Major trends of an environment
3.
4.
Increase in the speed of environmental change;
Growing complexity of the environment.
Source: H. Ansoff, 1984
Components of Environmental
Analysis
Source: D. Aaker
Defining the 'public'
Source: M. Wood, 2004
Different degrees of product newness
Source: S. Hollensen, 2003
Some important variables in the
international Societal environment
Source: S. Hollensen, 2003
Some important variables in the
international Societal environment
The planning gap
Source: S. Hollensen, 2003
The Strategic-Planning Gap
External Analysis
Opportunities
Threats
Enter new markets or segments?
Add to product line?
Diversity into related products?
Add complementary products?
Vertical integration?
Ability to move to better strategic group?
Complacency among rival firms?
Faster market growth?
Other?
Likely entry of new competitors?
Rising sales of substitute products?
Slower market growth?
Adverse government policies?
Growing competitive pressures?
Vulnerability to recession and business
cycle?
Growing bargaining power of customers
or suppliers?
Changing buyer needs and tastes?
Adverse demographic chages?
Other?
Source: S.
Certo & J.
Peter, 1988
Strategic
Groups in the
Major
Appliance
Industry
Components of
Environmental
Analysis
Internal/ Ressources Analysis
Types of Competition and Expected Firm
Performance
Type of
Competition
Perfect
competition
Attributes
Large number of
firms
Homogeneous
product
Low-cost entry
and exit
Examples
Stock market
Crude oil
Expected
Firm
Performance
Competitive
Parity
Source: J.
Barney &
W.
Hesterly,
2006
Types of Competition and Expected Firm
Performance
Monopolistic
Competition
Large
number of
firms
Heterogeneous
products
Low-cost
entry and exit
Toothpaste
Shampoo
Golf balls
Automobiles
Competitive
Advantage
Oligopoly
Small
number of
firms
Homogeneous
products
Costly entry
and exit
One firm
Costly entry
U.S steel and
autos in the
1950s
U.S.
breakfast
cereal
Competitive
Advantage
Home mail
delivery
Competitive
Advantage
Monopoly
A simplified version of the value chain
Source: S. Hollensen,
2003
BCG's Growth-Share Matrix
Source: S. Certo, J. Peter, 1988
Cash generation in the BCG matrix
Source: S. Hollensen, 2003
Compiling the GE matrix and making
conclusions based on it. Step 2 Estimate
position SBUs in the GE matrix
Source: S. Hollensen, 2003
Compiling the GE matrix and making conclusions based
on it. Step 3 Strategic implications of SBU
positions
Source: S. Hollensen, 2003
Core Competencies for the Example of Honca Roots are underlying skills and capabilities that
represent core competencies
Source:J. Mohr, S. Sengupta, S.
Slater, 2005
Experience curves in different functions
picture A
Source: S. Hollensen,
2003
Experience curves in different functions
picture B
Source: S. Hollensen,
2003
GE's Multifactor Portfolio Matrix
Source: S. Certo, J. Peter,
1988
Gillette's international market country
portfolio
Source: S. Hollensen,
2003
Marketing Planning, principles into
practice
Source: M. Wood, 2004
Model for development of core
competences
Source: S. Hollensen, 2003
Push and pull strategies in the car industry
value chain
Source: S. Hollensen, 2003
The business system of Ikea
Source: S. Hollensen, 2003
The Product Life Cycle, Innovation, and the
Role of Alliances
Source: J. Mohr, S.
Sengupta, S. Slater, 2005
Timing and Impact of Management
Attention and Influence
Source: R. Burgelman,
M. Maidique, S.
Wheelwright, 1995
Vickers Map of Competencies
Source: R. Burgelman,
M. Maidique, S.
Wheelwright, 1995
Core Competencies at Canon part 1
Precision
mechanics
Fine optics
Microelectronics
Basic camera
Compact
fashion camera
Electronic
camera
EOS autofocus
camera
Video still
camera
Source: G.
Hammel, C.K.
Prahalad, 1999
Core Competencies at Canon part 2
Laser beam
printer
Color video
printer
Bubble jet
printer
Basic fax
Laser fax
Calculator
Plain paper
copier
Source: G. Hammel, C.K.
Prahalad, 1999
Core Competencies at Canon part 3
Battery PPC
Color copier
Laser copier
Color laser
copier
Navi
Still video
system
Source: G. Hammel,
C.K. Prahalad, 1999
Core Competencies at Canon part 4
Laser imager
Cell analyzer
Mask aligners
Stepper sligners
Excimer laser
aligners
Source: G. Hammel, C.K.
Prahalad, 1999
Internal Analysis
Strengths
Weaknesses
A distinctive competence?
Adequate financial resources?
Good competitive skills?
Well thought of by buyers?
An acknowledged market leader?
Well-conceived functional area
strategies?
Access to economies of scale?
Insulated (at least somewhat) form
strong competitive pressures?
Proprietary technology?
Cost advantages?
Competitive advantages?
Product innovation abilities?
Proven management?
Other?
No clear strategic direction?
A deteriorating competitive position?
Obsolete facilities?
Subpar profitability because…?
Lack of managerial depth and talent?
Missing any key skills or competences?
Poor track record in implementing
strategy?
Plagued with internal operating
problems?
Vulnerable to competitive pressures?
Falling behind in R&D?
Too narrow a product line?
Weak market image?
Competitive disadvantages?
Below-average marketing skills?
Unable to finance needed changes in
strategy?
Other?
Source: S.
Certo & J.
Peter, 1988
Identifing key competences at DaimlerBenz
The case of Daimler-Benz provides a good example of the
management of technological competences. This internal
process takes two to three months, and involves the
group’s senior management. External consultants
corroborate the internal analysis and futher develop the
opinions gathered from the business units. The process is
summarized in the nine main phases shown in Tabale 2.
Source: S. Hollensen, 2003
Stages in identification of key competences at
Daimler-Benz
1.
2.
3.
4.
5.
6.
7.
8.
9.
Products, clients and markets
Key factor of success (KFS)
Future market trends and the evolution of KFS
Indentification of areas of key competences
Initial formulation of key competences
Mult-kriteria checking
Fine-tirning and honing of these critical competences
Needs analysis in terms of the key competences
Study of competences other than key competences that should be
retained
Source: S. Hollensen, 2003, p.51
Compiling the GE matrix and making
conclusions based on it
Step 1:
Determining the factors (only shown for hydraulic
pumps)
Step 2:
Estimate position of SBUs inthe GE matrix
Step 3:
Strategic Implication of SBU positions
The SBU only, e.g .
Score/value
Hydraulic pumps
Market
0.80
attractiveness
1.00
Weight
x
Rating
(1-5)
Overall market size
Annua market growth rate
Historical profit margin
0.20
4
0.20
0.15
5
4
0.60
Competitive intensity
0.15
2
Technological requirements
0.15
4
Inflationary vulnerability
0.05
0.30
0.60
3
0.15
Energy requirements
0.05
2
Environmental impact
0.05
3
Total
1.00
0.10
0.15
3.70
=
Weight
Business
strenght
Market share
Share growth
Product quality
Brand reputation
Distribution network
Promotional effectiveness
Productive capacity
Productive efficiency
Unit costs
Material supplies
R&D performance
Managerial personnel
Total
0.10
0.15
0.10
0.10
0.05
0.05
0.05
0.05
0.15
0. 05
0.10
0.05
1.00
x
Rating
4
2
4
5
4
3
3
2
3
5
3
4
= Score/value
0.40
0.30
0.40
0.50
0.20
0.15
0.15
0.10
0.45
0.25
0.30
0.20
3.40
SOURCE: S. Hollensen, 2003
Market
Attractiveness CompetitivePosition
Portfolio
Classification
and Strategies
Market
Attractiveness CompetitivePosition Portfolio
Classification and
Strategies
Factors contributing to market
attractiveness and competitive position
Attractiveness of your market
Market factors
Size (value, units or both)
Size of key segments
Growth rate per year:
-total
-segments
Diversity of market
Sensitivity to price, service features
and external factors
Cyclically
Seasonality
Bargaining power of upstream
suppliers
Bargaining power of downstream
suppliers
Competitive position of your business
(business strengths)
Your share (in equivalent terms)
Your share of key segments
Your annual growth rate:
-total
-segments
Diversity of your participation
Your influence on the market
Lags or leads
Bargaining power of your suppliers
Bargaining power of your customers
Competition
Types of competitor
Degree of concentration
Changes in type and mix
Entries to and exits from market
segment
Changes in share
Substitution by new technology
Degrees and types of integration
Where you fit, how you compare in
terms of product, marketing capability
Service, production strength, financial
strength, management
Segments you have entered or left
Your relative share change
Your vulnerability to new technology
Your own level of integration
Financial and economic factors
Contribution margins
Leveraging factors, such as economies
of scale and experience
Barriers to entry or exit (both financial
and non financial)
Capacity utilization
Your margins
Your scale and experience
Barriers to your entry or exit (both
financial and non financial)
Your capacity utilization
Technological factors
Maturity and volatility
Complexity
Differentiation
Patent and copyrights
Manufacturing process technology
required
Socio-political factors in your
environment
Social attitudes and trends
Law and government agency regulations
Influence with pressure groups and
government representatives
Human factors, such as unionization
and community acceptance
Your ability to cope with change
How strong your skills are
Types of your technological skills
Your patent protection
Your manufacturing technology
Your company’s responsiveness ad
flexibility
Your company’s ability to cope
Your company’s aggressiveness
Your company’s relationships
Source: S.
Hollensen,
2003
The Value Chan and Competitive
Advantage
Source: M. Porter,
2006
The Value Chan and Competitive
Advantage
Source: M. Porter, 2006
The Boston
Consulting
Group's
Growth-Share
Matrix
Business
PositionIndustry
Attractiveness
Matrix
The
BreakEven
Time
Metric
Basic Conditions
Supply
Demand
Raw materials
Technology
Unionization
Product durability
Value weight
Business attitudes
Public policies
Price elasticity
Substitutes
Rate of growth
Cyclical and seasonal
character
Purchase method
Marketing type
Industry structure
Model of
Organisation
Analysis
Number of sellers
Product differentiation
Entry and mobility barriers
Exit and shrinkage barriers
Cost structures
Vertical integration
Global reach
Conduct
Pricing behavior
Product strategy and advertising
Research and innovation
Plant investment
Legal tactics
Performance
Production and allocative efficiency
Progress
Full employment
Equity
Source: F. M. Scherer, 1980
The Value Chain
SWOT Analysis
Important Considerations for SWOT
Analysis
Internal Analysis
Strengths
Weaknesses
A distinctive competence?
Adequate financial resources?
Good competitive skills?
Well thought of by buyers?
An acknowledged market leader?
Well-conceived functional area
strategies?
Access to economies of scale?
Insulated (at least somewhat) form
strong competitive pressures?
Proprietary technology?
Cost advantages?
Competitive advantages?
Product innovation abilities?
Proven management?
Other?
No clear strategic direction?
A deteriorating competitive position?
Obsolete facilities?
Subpar profitability because…?
Lack of managerial depth and talent?
Missing any key skills or competences?
Poor track record in implementing
strategy?
Plagued with internal operating
problems?
Vulnerable to competitive pressures?
Falling behind in R&D?
Too narrow a product line?
Weak market image?
Competitive disadventages?
Below-average marketing skills?
Unable to finance needed changes in
strategy?
Other?
Source: S.
Certo & J.
Peter, 1988
External Analysis
Opportunities
Threats
Enter new markets or segments?
Add to product line?
Diversity into related products?
Add complementary products?
Vertical integration?
Ability to move to better strategic group?
Complacency among rival firms?
Faster market growth?
Other?
Likely entry of new competitors?
Rising sales of substitute products?
Slower market growth?
Adverse government policies?
Growing competitive pressures?
Vulnerability to recession and business
cycle?
Growing bargaining power of customers
or suppliers?
Changing buyer needs and tastes?
Adverse demographic changes?
Other?
Source: S.
Certo & J.
Peter, 1988
The Business Strategic-Planning Process
Oportunity
Matrix
Threat Matrix
Strengths and Weaknesses Analysis
Generic Strategies
Characteristics of costs strategy
Cost strategy
•
Classical enterprise strategy.
•
Success factor - low cost (price).
•
The strategy needs absorptive market.
•
Typical requirements – big scale of production standard products,
specialized technology.
•
Doesn't ”work” in ”saturated” market .
Source: [M. Moszkowicz, 2005]
Characteristics of differentiation strategy
Differentiation strategy
• Totally opposite to cost strategy.
• In general - to achieve features which differentiate products
form others.
• Typical factors of differentiation  color, shape, trade mark,
distributions.
• The strategy ”works” at saturated markets.
• The differentiation features should be highly-estimated by
clients.
Source: [M. Moszkowicz, 2005]
Strategies of SBU level. Model created by H.G. Steinmann
and G. Schreyoegg
7
5
8
Costs
3
4
Main direction
of competition
6
Change
2
1
Differentiation
Competition
rules
Adaptation
Market
segment
Source: [H.G. Steinmann, G. Schreyoegg, 2001]
Competition
area
Whole
market
Strategies of SBU level. Model created by M. Moszkowicz (Moszkowicz cube)
4
3
2
7
6
8
1
Towards client
5
Market orientation
Towards needs
Production
Market
Coordination the adaptable
activities
1 – cost strategy
2 – strategy of technological niche
3 – strategy of computer integrated manufacturing
4 – product diversification strategy
Source: [M. Moszkowicz, 2005]
5 – mass marketing strategy
6 – strategy of market niche
7 – products differentiation strategy
8 – strategy of focused marketing
Corporate strategy – model of M. Moszkowicz
7
5
8
External
3
4
Type of
development
6
Passive
2
1
Internal
Active
One
market
Source: [M. Moszkowicz, 2005]
Relation to
uncertainty
Area of
activity
Many
markets
1. Penetration strategy
5. Monopolization strategy
2. Internationalization strategy
6. Diversification strategy
3. Integration strategy
7. Acquisition strategy
4. Enterprising strategy
8. Globalization strategy
Ways Firms Can Differentiate Their
Products
To differentiate their products, firms can focus directly on the
attributes of it products or services , or
1. Product features
2. Product complexity
3. Timing of product introduction
4. Location
on relationships between itself and its customers, or
5. Product customization
6. Consumer marketing
7. Product reputation
on linkages within or between firms
8. Linkages among functions within a firm
9. Linkages with other firms
10. Product mix
11. Distribution channels
12. Service and support
Source: J. Barney & W.
Hesterly, 2006
Creating the Mix of Product Process
Development Projects
Source: R. Burgelman, M. Maidique, S.
Wheelwright, 1995
Generic strategies
Source: S. Hollensen, 2003
Market definition
Source: M. Wood, 2004
The Ansoff product-market strategy
Source: S. Hollensen, 2003
The Microsoft-Lego alliance
Source: S. Hollensen,
2003
The Nine Strategies to entry a Global Market
Source: S. Hollensen, 2003
The three levels of a product
Source: S.
Hollensen, 2003
Major motives for starting export
Pro-active motives
Reactive motives
Profit and growth goals
Managerial urge
Technology competence/unique product
Foreign market opportunities/market
information
Economies of scale
Tax benefits
Competitive pressures
Domestic market: small and saturated
Overproduction/excess capacity
Unsolicited foreign orders
Extended sales of seasonal products
Proximity to international
customers/psychological distance
Source: S. Hollensen,
2003
Risks of the Generic Strategies
RISKS OF COST
LEADERSHIP
RISKS OF
DIFFERENTIATION
RISKS OF FOCUS
Cost leadership is not
sustained
competitors imitate
technology changes
other bases for cost
leadership erode
Differentiation is not
sustained
competitors imitate
bases for differentiation
become less important to
buyers
The focus strategy is
imitated
The target segment
becomes structurally
unattractive
structure erodes
demand disappears
Proximity in
differentiation is lost
Cost proximity is lost
Broadly-targeted
competitors overwhelm
the segment
the segment’s differences
from other segments
narrow
the advantages of a broad
line increase
Cost focusers achieve
even lower cost in
segments
Differentiation focusers
achieve even greater
differentiation in segments
New focusers subsegment the industry
Source:
M.
Porter,
Product and Process Technology and the
Generic Strategies
COST
LEADERSHIP
DIFFERENTIATION
COST
FOCUS
DIFFERENTIATION
FOCUS
Product
Technological
Change
Product
development to
reduce product
cost by lowering
material content,
facilitating ease of
manufacture,
simplify logistical
requirements, etc.
Illustrative
Technology Product development
to enhance product
quality, features,
deliverability, or
switching costs
Technological Policies
Product
development
to design in
only enough
performance
for the target
segment’s
needs
Product design to
meet the needs of a
particular segment
better than broadlytargeted competitors
Process
Technological
Change
Learning curve
process
improvement to
reduce material
usage or lower
labor input
Process development
to support high
tolerances, greater
quality control, more
reliable scheduling,
faster response time
to orders, and other
dimensions that raise
buyer value
Process
development
to tune the
value chain
to a
segment’s
needs in
order to
lower the
cost of
serving the
segement
Process development
to tune the value
chain to a segment
needs in order to
raise buyer value
Process
development to
enhance econoMies of scale
Source:
M. Porter
Model of
organization
developement
Understanding
strategy
development
Strategic
direction
from prior
decisions
Specific Strategies for Business and Conditions Under
Which Each Might Be Applicable
Size of
organization
Large
PHASE 1
PHASE 2
PHASE 3
PHASE 4
PHASE 5
PHASE 6
Evolution stages
Crisis of
IDENTITY
Revolution stages
Crisis of
RED TAPE
6: Growth
through
INTEGRATION
5: Growth through
COLLABORATION
The six
phases of
growth
Crisis of
AUTONOMY
Crisis of
CONTROL
4: Growth through
COORDINATION
3: Growth through
DELEGATION
Crisis of
LIDERSHIP
2: Growth through
DIRECTION
Small
1: Growth through
CREATIVITY
Young Age of organization
Source: L. E. Greiner, 1972, adapted by J. Skonieczny, 1999
Mature
Organization practices during evolution in
the five phases of growth
Three Intensive
Growth
StrategiesAnsoff's Product
or Market
Expansion Grid
Performance
Importance
Matrix
Successive Sets Involved in Customer
Decision Making
Major Classes of Growth Opportunities
Intensive Growth
Integrative Growth
Diversification Growth
Market penetration

Backward integration

Market development

Forward integration

Product development

Horizontal integration

Source: P. Kotler, 1991
Concentric
diversification
Horizontal
diversification
Conglomerate
diversification
Comparison of Strategic Profiles of Texas
Instruments and Hewlett-Packard
TEXAS INSTRUMENTS
BUSINESS
Competitive advantage in
STRATEGY
large standard markets
based on long-run low cost
position
MARKETING
High volume/low price
Rapid growth
MANUFACTURING Experience curve cost-driven
Vertical integration
R&D
Design to cost
FINANCIAL
HUMAN
RESOURCES
Aggressive
Full utilization
Competitive
Individual incentives
Source: P. Kotler, 1991
HEWLETT-PACKARD
Competitive advantage in
selected, small markets based
on unique, high-value products
High value/ high price
Controlled growth
Delivery and quality
Limited vertical integration
Features and quality
Design to performance
Conservative
No debt
Cooperative
Companywide incentives
Strategy Implementation
Strategy implementation - Definition
Strategy implementation – finding the resources which, when used
properly (accurate to circumstances) result in obtaining strategic
target by an organization.
J.M. Lehner
Source: [P. Kubiński, 2005]
Patterns of strategy implementation
Staff effort in strategy
formulating and implementing
Big
Small
Self-made
pattern
Cultural
pattern
Collaboration
pattern
Reorganizational
pattern
Directive
pattern
Big
Source: [P. Kubiński, 2005]
Top management efforts in strategy
formulating and implementing
Small
Sequence of strategy building and implementing
Strategic aims and targets.
Activity programs at functional areas,
supply, production, technology, marketing,
distribution finance, organizations.
Dimensions and measures of
achievements. People responsible for
coordination and realization.
Budgets and realization requirements
(material and non material investments)
Control system of program realization
Source: [Obłój, 1998, p. 79]
Types of strategies and adequate structures – according to
Chandler
Strategy
Organizational structure
One product
Functional/ centralized
Diversification
Departments/ decentralized
Mixed diversification
Holding/strongly decentralized
Source: [P. Kubiński, 2005]
Marketing plan direction
Source: M. Wood, 2004
Ways Firms Can Differentiate Their Products
To differentiate their products, firms can focus directly on the
attributes of it products or services , or
1. Product features
2. Product complexity
3. Timing of product introduction
4. Location
on relationships between itself and its customers, or
5. Product customization
6. Consumer marketing
7. Product reputation
on linkages within or between firms
8. Linkages among functions within a firm
9. Linkages with other firms
10. Product mix
11. Distribution channels
12. Service and support
Source: J. Barney & W.
Hesterly, 2006, p. 147
Organising to Implement Product
Differentiation Strategies
Organizational Structure:
1. Cross-divisional/cross-functional product development teams
2. Complex matrix structures
3. Isolated pockets of intense creative efforts: Skunk works
Management Control Systems:
1.Broad decision-making guidelines
2. Managerial freedom within guidelines
3. A policy of experimentation
Compensation Policies
1. Rewards for risk-talking, not punishment for failures
2. Rewards for creative flair
3. Multidimensional performance measurement
Source: J. Barney &
W. Hesterly, 2006, p.
164
The Organizational Requirements for
Implementing Cost Leadership and Product
Differentiation Strategies
Cost leadership
Product differentiation
Organizational structure
1.Few layers in the reporting
structure
2. Simple reporting relationships
3. Small corporate staff
4. Focus on narrow range of
business functions
Organizational structure
1. Cross-divisional,cross-functional
product development teams
2. Willingness to explore new
structures to exploit new
opportunities
3. Isolated pockets of intense
creative efforts
Source: J. Barney &
W. Hesterly, 2006,
p. 169
The Organisational Requirements for
Implementing Cost Leadership and Product
Differentiation Strategies
Management control systems
1. Tight cost-control systems
2. Quantitative cost goals
3. Close supervision of labor, raw
material, inventory, and other costs
4. A cost leadership philosophy
Management control systems
1. Broad decision-making guidelines
2. Managerial freedom within guidelines
3. Policy of experimentation
Compensation policies
1. Reward for cost reduction
2. Incentives for all employees to be
involved in cost reduction
Compensation policies
1. Rewards for risk-taking, not
punishment for failures
2. Rewards for creative flair
3. Multidimensional performance
measurement
Source: J. Barney & W. Hesterly, 2006, p. 169
The balanced
Scorecard pprovides
a framework to
translate a sstrategy
into Operational
Terms
Entrepreneutrial Stucture
Functional Structure
Divisional
Structure
Strategic
Business Unit
Structure
Matrix Structure
Intrapreneutrial
Unit with Division
Structure
The Strategic Planning. Implementation,
and Control Process
McKinsey 7-S
Framework
Relationship
between Marketing
and Strategic
Planning