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Case Analysis

Framework - Strategic
Management
Ian Lee, Ph.D
Carleton University
Ottawa, Canada
ianlee@ibm.net

Stratrategic Management

National/Macro Industry Company Resources,


Context Context Capabilities, and
Strategies

Company
Performance

Strategic Analysis = Choices


Thinking Strategically
About Industry
and Competitive
Conditions

ID Choice of
Strategic Options Best
Open to Firm Strategy

Thinking Strategically
About Firm’s
Own Situation

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Case Background
◆Brief factual summary

◆1/2 page or so

◆name of firm, time of case

◆broad issue(s)

PEST or TESP Analysis


◆Technological O/T

◆Economic O/T

◆Socio-cultural O/T

◆Political-legal O/T

Macro and Competitive Environments


General Environment
Demographics

Global Political/Legal
Competitive
Environment
Threat of new entrants
Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products
Competitive rivalry

Sociocultural Technological

Macroeconomic

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Summary
◆Most important or significant O/T

◆not all O/T equally significant

◆focus on those with greatest impact

Industry Analysis

5 Forces Model of Competition


Substitute
Products

Rivalry
Among
Suppliers Buyers
Competing
Sellers

Potential
New
Entrants

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Porter’s 5 Forces
◆Head to head competition L-M-H

◆substitutes L-M-H

◆threat of entry L-M-H

◆power of buyers & suppliers L-M-H

Strategic Group Map


◆Cluster the major competitors

◆according to their “niche”

◆graphically

Strategic Groups in Department Store Industry


High
Upscale

Perceived
Quality National
Chain
Warehouse

Discount
Low

Low High
Retail Price

4
Major Competitor Analysis
◆Who are they?

◆what strategies are they pursuing

◆relative market share? profitability?

Driving Forces
◆major forces of change affecting all firms

◆e.g. entry of new competitors

◆de-integration

◆globalization of industry

Key Success Factors


◆Generic characteristics for all firms

◆necessary for success

◆regardless of particular business strategy

◆whether low cost or differentiation

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Overall Industry Attractiveness
◆Based on:

◆ Porter’s 5 forces analysis

◆driving forces, KSFs, competitor analysis

◆industry (un)attractive e.g. ROI?

Business Unit Analysis

Value Chain
◆Apply S/W to Porter’s VC

◆under each heading

◆also helps understand Hamel Framework

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Value Chain
Primary Activities and Costs

Inbound Outbound Sales and Profit


Operations Service
Logistics Logistics Marketing Margin

Product R&D, Technology, Systems Development


Human Resources Management Support
Activities
General Administration and Costs

Value Chain System


Upstream Company Downstream
Value Chains Value Chains Value Chains

Activities,
Internally
Activities, Costs, &
Performed Buyer/User
Costs, & Margins of
Activities, Value
Margins of Foward
Costs, & Chains
Suppliers Channel
Margins
Allies

Hamel’s Framework
◆Core Competencies

◆Core Product

◆End Product

◆SCA

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Hamel’s Competency Framework
Capabilities
Source of Source of
Teams of
Resources

Core
Competencies
Resources
Sources of
* Tangible Competitive
* Intangible Components of Advantage
Internal Analysis

Strategic Sustained
Competitiveness Competitive Foundation
Advantage of
Above-
Above-Average
Above-Average
Returns Gained through
Core Competencies
Pathway to

What a firm Does...


Core Competencies
that is Strategically
Core Competencies must be: Valuable
Valuable

Rare

Costly to Imitate

Nonsubstitutable

Outcomes from Combos of Criteria for SCA

Costly to Nonsub-
Nonsub- Competitive Performance
Valuable Rare
Imitate stitutable Consequences Implications
Below
Competitive
NO NO NO NO Average
Advantage
Returns

Competitive Average
YES NO NO YES/NO Parity Returns

Temporary Aver./Above
YES YES NO YES/NO Competitive Average
Advantage Returns
Above
YES YES YES YES SCA Average
Returns

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Financial Statement Analysis
A. Investment Return

◆Capital Market Ratios:

!EPS

!P/E

B. Financial Strength
◆Liquidity Ratios:
!Current, Acid Test

◆Solvency Ratios:
!D/A, D/E, Interest Coverage, Cash Flow/Debt

C. Management Performance
◆Profitability Ratios:

!Gross Margin
!Net Profit Margin
!Return on Assets
!Return on Equity
!Return on Capital

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D. Resource Utilization Ratios
◆Asset Turnover

◆Payables Turnover

Mission Statement
◆Construct firm’s mission from data

◆may recommend changes in mission

◆under strategies

Corporate Objectives
◆Presently followed by firm

◆quantitative objectives

◆qualitative objectives

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Relationships between ...
Level 1 Overall Scope Corporate Corporate
and Strategic Level Level
Corporate-Level
Mission Objectives Strategy
Mgrs
Two-Way Influence Two-Way Influence Two-Way Influence

Level 2 Business Business Business


Business-Level Level Level Level
General Mgrs Missions Objectives Strategies

Two-Way Influence Two-Way Influence Two-Way Influence

Level 3 Functional Functional Functional


Heads of Major Area Area Area
Functional Areas Missions Objectives Strategies
Two-Way Influence Two-Way Influence Two-Way Influence

Level 4 Operating Field Unit Operating


Missions Objectives Strategies
Plant Managers,
Lower-Level Supervisors

External Environment
PEST
Five Forces Analysis Sustainable
Competitive
Advantage
Internal Environment
Resources, Capabilities and
Core Competencies

Business Level
Strategy

Overall Firm (un)Attractiveness


◆Based on:
! value chain analysis
!core competency analysis
!F/S analysis
!sustainable competitive advantage

◆is firm attractive e.g. ROI or profitability?

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Strategic Issues

A Diversified Company
Corporate
Corporate-Level Strategy
Managers
Two-Way Influence

Business-Level Business
General Managers Strategies

Two-Way Influence
Heads of Major
Functional Areas Functional Strategies

Two-Way Influence
Plant Managers,
Lower-Level Operating Strategies
Supervisors

Corporate Issues
1. What businesses should we be in?
◆re macro, industry, firm O/T, S/W analysis
!vertical, horizontal, international diversification
!internal growth vs acquisitions vs alliances

2. How should corporate govern SBUs?


!Centralized vs decentralized
!large HQ vs small HQ
!portfolio approach vs competencies approach

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Business Level Issues
1. What product markets should we be in?
!horizontal (McDonalds sells chicken)
!vertical (outsourcing)

2. How should firm produce SCA?


!Which of 4 generic strategies?

Functional Level Issues


◆How should the functional depts support the
SBU strategy

◆what functional strategies needed

Corporate and Business Strategy

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Corporate Strategy Alternatives
◆List and analyze major alternatives:

!vertical, horizontal, intl diversification


!internal growth vs acquisitions vs alliances

◆should address issues defined above

Business Strategy Alternatives


◆List and analyze strategy alternatives

◆should address issues at SBU defined above

Generic Business Level Strategies


Source of CA

Cost Uniqueness

Broad Cost Differen-


Target
Market Leadership tiation
Breadth of
Competitive
Scope
Focused
Narrow Focused
Target Differen-
Market Low Cost
tiation

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Factors Shaping Strategy
Societal,
Opportunities
External Factors
Political, Industry
and
Regulatory Attractiveness
Threats
Factors

Conclusions
about Identification Crafting
How and Strategy
Company’s Strategic Situation Internal/
External
Evaluation for
of Overall
Factors Alternatives Situation
Matter

Internal
Strengths Key Shared Values
Executives’ and
and
Influences Culture
Weaknesses Internal Factors

Summary
◆Summarize major O/T in PEST
◆summarize strength of 5 forces
◆summarize industry (un)attractiveness
◆summarize VC & major competencies
◆summarize major strategic issues
◆summarize corporate & business strategies
◆summarize how strategy recommendations
solve problems

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