Strategy - basic concepts

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Introduction to basic concepts of business strategy

Transcript of Strategy - basic concepts

  • Where do we go?How do we get there?

  • HighHighLowLowCustomer valueOuter productivityDoing right thingsProfitabilityInner productivityDoing things right

  • Corporate strategyLever brothers strategyBusiness strategyLever brothers shampoo divisions strategy in PakistanOperational strategyStrategy for the day to day running of a businessFunctional strategiesmarketing strategyHow marketing is going to help achieve the business strategytechnology strategyHow technology helpscompetitive StrategyWho else is doing it and how do we survive?

  • Competitive advantage grows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage: cost leadership and differentiation. Michael Porter, Competitive Advantage, 1985, p.3

  • Operational efficiencyDo it better. Optimize the supply chain, buy new machines, fire people, acquire competitionCustomer IntimacyPeople pay better if they know and trust youProduct LeadershipConstantly creating new products to avoid competition

  • Top ManagersMiddle ManagersSupervisors and EmployeesImplementationof strategy

  • StrategyGoalGoalGoalActionsEmergent strategy

  • How to read, analyze and understand the environment?PEST analysisSWOT analysisPorters Five Forces Analysis

  • Political Factors.The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as:1.How stable is the political environment? 2.Will government policy influence laws that regulate or tax your business?3.What is the government's position on marketing ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as EU, NAFTA, ASEAN, or others?

  • Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:Interest rates.Inflation Employment level per capita. Long-term prospects for the economy Gross Domestic Product (GDP) per capita, and so on

  • The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:1.What is the dominant religion? 2.What are attitudes to foreign products and services? 3.Does language impact upon the diffusion of products onto markets? 4.How much time do consumers have for leisure? 5.What are the roles of men and women within society? 6.How long are the population living? Are the older generations wealthy? 7.Do the population have a strong/weak opinion on green issues? http://www.statpak.gov.pk/depts/pco/statistics/demographic_indicators98/demographic_indicators.html

  • Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points: 1. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc? 4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?

  • Strength: attributes of the organization that are helpful to achieving the objective.Weaknesses: attributes of the organization that are harmful to achieving the objective.Opportunities: external conditions that are helpful to achieving the objective.Threats: external conditions that are harmful to achieving the objective.

  • Resources: financial, intellectual, locational Customer service Efficiency Competitive advantages Infrastructure Quality Staff Management Price Delivery time Cost Capacity Relationships with key industry customers Brand and Reputation in the Market Local Language Knowledge Brand Names Ethics Environment

  • Political/Legal Market Trends Economic condition Expectations of stakeholders Technology Public expectations Competitors and competitive actions

  • Internal analysisStrengthsWeaknessesE x t e r n a l A n a l y s i sOpportunitiesS-O-Strategies: Develop new methods which are suitable to the company's strength.W-O-Strategies: Eliminate weaknesses to enable new opportunities.ThreatsS-T-Strategies: Use strength to defend threats.W-T-Strategies: Develop strategies to avoid weaknesses that could be targeted by threats.

  • Structural analysis within industries (???)Industry evolution:Fragmented IndustriesNo form has significant market share that can strongly influence the industry outcomeEmerging industriesNo rules of the game. Great uncertainty and great changeMature IndustriesSlow growth, selling to repeat buyers, greater emphasis on cost, core business processes are undergoing change, Industry profits decreaseDeclining industriesAn absolute decrease in unit sales over a sustained period of time.

  • Competitive analysisWhat drives the competitorWhat is the competitor doing and what can he do?Market signalsAnnouncements, after the fact analysis and discussions reveal the competitors true intentionsCompetitive movesThreatening moves: A competitor must predict and influence retaliationPerceptual lagRetaliation lagConflicting goals: Retaliation can hurt the company itselfDenying a base: Commitment: cornerstone of defensive strategy

  • ProductPositioning, is it differentiated enough to stand against competitionWhat kind of Brand Equity does the product hold up? Does it fit in with what the company does? Or is known to do? (Packaging issues)

  • The right goal: Superior long term ROI. Dont define goals in terms of market sharesA clear value preposition: A set of benefits that different from those of any competitorStrategy needs to be reflected in a distinctive value chainA company must perform different activities than rivals, or perform the same activities differently.Trade-off:Company must abandon or forego products or services or activities in order to be unique at others.Fit: Rivals can copy individual activities but not a set of reinforcing activities is much harder to copyContinuity:Frequent Reinvention is a sign there is no strategy at all

  • IT (or technology) Strategy

    Technology strategy is a planning document that explains how information technology should be utilized as part of an organization's overall business strategy.

  • Executive Summary - single page summary of the IT strategy High level organizational benefits Relationship to overall business strategy Resource summary Staffing Budgets Summary of key projects

  • Internal Capabilities IT Project Portfolio Management - An inventory of current projects being managed by the information technology department and their status. Note: It is not common to report current project status inside a future-looking strategy document. Current IT departmental strengths and weaknesses External Forces Summary of changes driven from outside the organization Rising expectations of users Example: growth of high-quality web user interfaces driven by Ajax technology Example: Availability of open-source learning management systems such as Moodle List of new IT projects requested by the organization

  • Opportunities Description of new cost reduction or efficiency increase opportunities Description of how Moore's Law (faster processors, networks or storage at lower costs) will impact the organizations ROI for technology Threats Description of disruptive forces that could cause the organization to become less profitable or competitive Analysis IT usage by competition Milestones List of monthly, quarterly or mid-year milestones and review dates to indicate if the strategy is on track List milestone name, deliverables and metrics

  • IT INDUSTRY LANDSCAPEBusiness Consulting (not strictly IT)Product vendorsProduct Sales teamsProduct ResellersImplementation partners = SIsOEM buildersServices (SIs)TrainingTechnology ConsultingSupport and maintenance

  • CUSTOMER IT DEPARTMENTSIn houseHighly OutsourcedSoftware packed with hardwareEmbeddedTelecom?Standard based softwareHosted servicesISPs, ASPs (Salesforce.com)

  • Xavor and a Product Vendor?Xavor and an in-house IT Department (they are competition)

  • XAVOR SPECIFIC ANALYSISWhats Xavors value preposition?What isnt Xavor doing?

  • What distinguishes Xavor from an in-house development setup?

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