IB - Module 8

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Strategy
bắt đầu học
what businesses want to achieve, its environment, resources, structure, activities and employees behaviour
Mintzberg's typology of strategies
bắt đầu học
Intended strategy - plan; Unrealised strategy - part of the plan that failed; Deliberate strategy - part of the plan that happened; realised strategy; emergent strategy - not planned, but happened during
plans vs patterns
bắt đầu học
distinction between intentions and what happens in reality
Rational approach
bắt đầu học
analysis; future-focused; deals with intended strategy; contingency thinking; fit between Strengths&Weaknesses (internally) and Threats&Opportunities (externally); SWOT as a tool, but might be inaccurate
Flexible approach
bắt đầu học
managers should have multiple intended strategies: when the environment moves fast, don't work towards single SWOT, be prepared for change by envisioning scenarios; preparing for few scenarios isn't free, not very efficient
Creative approach
bắt đầu học
analysis too much based on info that others have as well; analysis paralysis - delay of decisions and action; encourages managers to use their own imagination and vision; rational&flexible approach also require creativity; it is based on some knowledge
Similarities between rational, flexible and creative approach
bắt đầu học
they tell you how to get intended strategy; these approaches give suggestion and advice on how to formulate strategy; we call it a PRESCRIPTIVE theory
Prescriptive theory
bắt đầu học
tips, tricks, how-to; theory can be put into practice; common in business&management, not in Biology; consultants, management gurus
Descriptive theory
bắt đầu học
describe, understand, predict real life; theory can be tested & falsified; academics; explore how strategy is actually formed
Behavioral approach
bắt đầu học
describes and predicts that: values, ideology, personality of top managers determine how the environment is perceived and which strategies get picked and implemented; power&politics impact strategy formulation rather than rational analysis
Emergent (incremental) approach
bắt đầu học
objectives are constantly adjusted as people figure things out; people learn WHILE doing (not before); predicts that strategies spontaneously happen and emerge; strategy does not concern only top managers
Contingency
bắt đầu học
fit between organisational characteristics and business environment
Macro-environment analysis
bắt đầu học
SEPTEmber; PESTE
Industry analyses
bắt đầu học
industry lifecycle; five competitive forces, stakeholder analysis
Market analyses
bắt đầu học
5 Ps; customer needs, marketing shit
SEPTEmber analysis (PESTE)
bắt đầu học
Political, Economic, Socio-cultural, Technological, Ecological segments
Political-legal segment in PESTE
bắt đầu học
political stability, taxation, terrorism, trade regulations
Economic segment in PESTE
bắt đầu học
income per capita, unemployment, inflation
Socio-cultural segment in PESTE
bắt đầu học
noticing changes in demographics, education, life expectancy
Technological segment in PESTE
bắt đầu học
new technologies, e-commerce, energy accessibility
Ecological segment in PESTE
bắt đầu học
risk of natural disasters, ecological investment, availability of natural resources
Industry lifecycle analysis
bắt đầu học
4 stages: Initiation, Growth, Maturity, Decline; industry defined around products; industry consists of competitors producing goods and services
Initiation stage of Industry lifecycle
bắt đầu học
many new entrants, i.e. parcel deliveries by drones
Growth stage of Industry lifecycle
bắt đầu học
new entrants, demand for the product is still growing
Maturity stage of Industry lifecycle
bắt đầu học
many companies exit the industry, the peak sales are behind us
Decline stage of Industry lifecycle
bắt đầu học
sales decrease, profit decrease
Remarks on Industry lifecycle analysis
bắt đầu học
in growing industries, it's easier to find new markets and clients; in mature and declining, finding new clients is difficult; in mature industries, firms on average have lover costs (due to EXPERIENCE CURVE)
Experience Curve
bắt đầu học
as a business gains more experience producing a product, costs go down; as an industry gains more experience producing a product, costs of the firms within the industry should on average go down
Porter's Five Forces Analysis
bắt đầu học
Threat of New Entrants; Bargaining Power of Buyers; Bargaining Power of Suppliers; Threat of Substitutes; Competitive rivalry
Threat of New Entrants in Five Forces
bắt đầu học
it prevents current firms from charging too much - average profitability lowers; this threat is determined by entry barriers; high barriers to entry make the industry more attractive to the current players
Entry barriers
bắt đầu học
benefits of scale; economies of scale; industry maturity; customer switching costs are high; capital requirements - sometimes investments are required; access to distribution channels
Bargaining Power of Buyers in Five Forces
bắt đầu học
if buyers from industry are powerful they'll pay less, hence reduce profitability; this power is high when the concentration of customers is broad and switching costs are low; bargaining power of buyers becomes relevant when buyers are price-sensitive
Price sensitivity is high when
bắt đầu học
generic product is not important; buyers have low margins; industry product gas a large share of customers' cost structure
Bargaining Power of Suppliers in Five Forces
bắt đầu học
if suppliers to your industry are powerful, they can charge more, hence reduce the profitability
Bargaining Power of Suppliers is high when
bắt đầu học
there are few alternatives (concentration); switching costs of industry players are high
Threat of Substitutes in Five Forces
bắt đầu học
substitute performs same or similar function, but is a different product, different industry; if industry product can easily be substituted
Threat of substitutes is high when
bắt đầu học
substitutes are available; substitutes have better price/performance ratio; switching costs are low
Competitive rivalry in Five Forces
bắt đầu học
NOT every competitor is a rival&rivalry is not always high; Rivalry drives down profits (players incur costs or reduce)
Rivalry is high when
bắt đầu học
there are many competitors or competitors are of equal size; industry growth is slow; exit barriers are high - players cannot exit the industry; few opportunities to differentiate and focus on own group of customers
Stakeholder analysis
bắt đầu học
it helps to map out most important stakeholders: with a large stake in the company or with power to affect the company
Types of resources
bắt đầu học
Physical, Human, Financial, Organisational
VRIO model - competitive advantage
bắt đầu học
Valuable - allows to create value; Rare - must be rare, otherwise there's no advantage; Imperfectly imitable - if competitors can imitate, I'll lose my advantage; Organization - we can efficiently and effectively deploy the resource to create value
Confrontation analysis
bắt đầu học
confronting, comparing, contrasting internal vs external findings; these confrontations are the tuning point where you go from strategic analysis to formulating strategy
Portfolio analysis (BCG Matrix)
bắt đầu học
confronts one internal factor (market share) with one external (growth rate of the market for product or SBU)
Cash Cows in BCG Matrix
bắt đầu học
require few investments instead generate cash flow to invest somewhere else; High Market Share, Low Growth Market - strong position, but few investments required
Question Marks
bắt đầu học
Low Market Share, High Growth Market; easy opportunity to win customers
Stars
bắt đầu học
High Market Share; High Growth Market; best shot at future cash flow; investments are necessary to maintain the lead, but less risky than Question Marks; not all companies have a Cash Cow or Question Mark or Star un portfolio
Dogs
bắt đầu học
Low Market Share; Low Growth Market; few opportunities to gain new customers; weak position; if you have a portfolio of products or SBUs, do not invest in Dogs
SWOT analysis
bắt đầu học
Confrontation should give rough ingredients or inspiration or input for strategy formulation; for each OT: which SW are relevant and need to exploited or compensated; leads to unique solution - strategy as fit between organisation and environment
Formulating strategy
bắt đầu học
Real-life managers are usually not formulating new intended strategies all the time; There are prescriptive approaches that suggest how this can be done - Generic Strategy and Strategy Statement
Generic strategy
bắt đầu học
a company with a good generic strategy is less affected by the Five Forces; two ways to gain competitive advantage - 1. Cost Leadership, 2. Differentiation
Cost leadership
bắt đầu học
sells at the average price, but can minimise the costs of production (due to economies of scale or going furthest in the experience curve)
Differentiation
bắt đầu học
Differentiator can set higher prices, has higher costs, but can deliver a good in a way that the customer perceives more benefits
How cost leader can prevent himself from the effects of Five Forces?
bắt đầu học
Rivalry - margin to win the price wars; Threat of entrants - scale economies as an entry barrier; Threat of substitutes - cost leader matches price/perform. ratio; Buyer power - enough margin to deal; Supplier power - less profitable more affected
How differentiators can prevent themselves form the effect of 5 forces?
bắt đầu học
Rivalry - only with players on similar dimensions; Threat of Entrants - switching costs; Threat of substitutes - switching costs; Buyer power - switching costs, enough margin to deal; Supplier power - less profitable competitors more affected
Focus
bắt đầu học
focus on smaller niche or segment within broader industry
Strategy statement
bắt đầu học
simple, clear, succinct statement that everyone can internalise and use as a guiding light for making difficult choices; consists of 3 elements - strategic objective, scope, competitive advantage
Strategic objective
bắt đầu học
quantifiable target (sales, sales growth); time bound (in five years, each year etc.); can be used to evaluate; i.e. "to remain the most profitable player in the airline industry"
Scope
bắt đầu học
description of product and customers (markets or segments, location); choice for scope is informed by choice for generic strategy; clear description of intended customer group
Competitive advantage
bắt đầu học
Value proposition - dependent of choice on generic strategy, it explains why the targeted customer should buy your product; Internal Alignment - how activities, resources, competences are aligned

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