100 Slides
High
Joint Foreign Foreign
venture branch subsidiary
Joint
Export Licensing/ venture
Low
Low High
MARKET COMPLEXITY
Reactive/Follower Proactive/Leader
Anticipating
Gradual Revising strategy change and
Evolutionary to catch the waves initiating strategic
Change
actions to ride the
crest of the waves
The Strategic-Making Pyramid I
A DIVERSIFIED COMPANY
Responsibility of
corporate-level
managers
Corporate
Strategy
Two-Way Influence
Responsibility of
business-level Business Strategies
general managers
Two-Way Influence
Responsibility of
executive-level
managers Business
Strategy
Two-Way Influence
Responsibility of heads
of major functional Functional Strategies
activities within a
(R & D, manufacturing, marketing,
business
finance, human resources, etc.)
Two-Way Influence
Responsibility of plant
managers, geographic Operating Strategies
unit managers, and lower- (regions and districts, plants,
level supervisors departments within functional areas)
Identifying Strategy for a Single Business
Moves to respond and react
to changing conditions in the
macroenvironment and in industry
and competitive conditions
Collaborative
BUSINESS
Efforts to build competitive partnerships and
STRATEGY
advantage strategic alliances
with others
MACROENVIRONMENT
Le
g
IMMEDIATE INDUSTRY &
i sl
gy
COMPETITVE ENVIRONMENT
at
lo
io
no
n
ch
an
Te
d
Suppliers Substitute
re
g ul
at
io
ns
So COMPANY
cia
lV i cs
al
ue Rival Firms Buyers ph
ra
sa
nd og
e m
Li d
fe New Entrants n
sty tio
les la
o pu
P
The Economy at large
The Five-Forces Model of Competition
Firms in other
industries
offering
Substitute
Products
Suppliers of
raw materials,
RIVALRY
parts,
AMONG Buyers
components or
COMPETING
other resource
SELLERS
inputs
Potential
New Entrants
Mobilizing Company Resources to
Produce Competitive Advantage
Competitive
Advantage
Strategic
Assets and
Market Achievements
Competitive
Capabilities
Company Resources
Representative Company Value Chain
Purchased Distribution
Primary Supplies and Sales and Profit
and Operations Service
Activities Outbound Marketing Margin
and Costs Inbound Logistics
Logistics
Activities,
Costs
Activities, Internally and Margins of
Costs, and Performed Buyer/End User
Forward Channel
Margins of Activities, Costs Value Chains
Allies and
Suppliers and Margins Strategic
Partners
The Five Generic Competitive Strategies
TYPE OF COMPETITVE
ADVANTAGE BEING PURSUED
MARKET Best-Cost
TARGET Provider
Strategy
Size of
Competitive
Advantage
Size of
advantage
achieved
Strategic
moves Imitation,
are successful duplication,
in producing and „attacks“
a competitive by rivals erode
advantage the advantage
Time
Strategy Options for Local Companies in
Competing against Global Challengers
Dodge Rivals
by shifting to
High a new Contend on a
Business Model Global Level
or Market Niche
INDUSTRY
PRESSURES
TO GLOBALIZE
Transfer
Defend by
Company
using
Low Expertise to
„Home-Field“
Cross-Border
Advantages
Markets
The Three Strategy Horizons for
Sustaining Rapid Growth
Strategy
Horizon 3
Portfolio of Strategy
Horizon 2 „Long-Jump“
Strategy initiatives to sow the
Initiatives seeds for growth in
„Medium-Jump“in businesses of
initiatives to leverage the future
existing resources
and capabilities to Minimal revenue
Strategy pursue growth in gains now and likely
Horizon 1 new businesses losses, but potential
for significant
Moderate revenue
contribution to
„Short-Jump“
and profit gains now, revenues and profits
initiative to fortify
but foundation laid in 5-10 years
and extend current
for sizable gains
businesses
over next 2-5 years
Immediate gains in
revenues and profits
Time
Value Chains for Related Businesses
Support Activities
Supply Sales
Chain Customer
Business A Technology Operations and Distribution
Activities Service
Marketing
Supply Sales
Business B Chain Customer
Technology Operations and Distribution
Activities Service
Marketing
Support Activities
Value Chains for Unrelated Businesses
Support Activities
Supply Sales
Chain Customer
Business A Technology Operations and Distribution
Activities Service
Marketing
Supply Sales
Customer
Business B Chain Technology Operations and Distribution Service
Activities Marketing
Support Activities
Strategy Options for a Company that is
Already Diversified
Make New Acquisitions and/or Enter Divest Some of the Company‘s
into Additional Strategic Partnerships Existing Business
A Whether the
Efforts to capture Diversified scope of company
cross-business Company‘s operations is mostly
strategic fits domestic, increasingly
Strategy multinational or
global
Moves to
Moves to divest
strengthen
weak or
Moves to build positions in existing
unattractive
positions in new businesses via new
businesses
industries via acquisitions
acquisitions, merger,
internal start-up, or
alliances
A Representative Nine-Cell Industry
Attractiveness-Competitive Strength
Matrix
COMPETITIVE STRENGTHS/BUSINESS POSITION
Strong Average Weak
High Business F
Business A
LONG-TERM
INDUSTRY Medium
ATTRACTIVENESS
Business C Business B
to others
AN
Building Core Competencies and Competitive Capabilities
ORGANIZATION
Developing a competence/capability portfolio suited CAPABLE
to current strategy OF GOOD
Updating and reshaping the portfolio as external STRATEGY
conditions and strategy change EXECUTION
31 100
Value added
related to
6 31% distribution
18 and marketing
45
Value added
related to
69% supply and
assembly
Single-Industry Firm
Diversified Firm
Firm Value Chain
Business Unit
Value Chain
Business Unit
Value Chain
The Generic Value Chain
FIRM INFRASTRUCTURE
HUMAN RESOURCES MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
MARGIN
Cost focuses achieve even Differentiation focuses New focuses subsegment the
lower cost in segments achieve even greater industry
differentiation in segments
Three Generic Strategies
COMPETITIVE ADVANTAGE
Broad
1. Cost Leadership 2. Differentiation
Target
COMPETITIVE
SCOPE
Narrow
3A. Cost Focus 3B. Differentiation Focus
Target
Operational Effectiveness Versus
Strategic Positioning
High
Productivity Frontier
NONPRICE
BUYER
VALUE
DELIVERED
Low
High Low
EXTENT OF DIFFERENTIATION/SEGMENTATION
Low High
Modest share
Good difference
Competitions needed for
stability
COMPETITORS
Large share
Bad difference
Competitions needed for
stability
Shared Value Activities and Cost Position
High Potentially
important if Strategic
cost behavior interrelationships
changes
PERCENTAGE
OF OPERATING
COSTS OR ASSETS
REPRESENTED
BY THE VALUE
ACTIVITY
Potentially
Unimportant important if
interrelationships cost structure
changes
Low
Low High
SENSITIVITY TO SCALE,
LEARNING, OR UTILIZATION
IN THE VALUE ACTIVITY
Alternative Scope of Leader and
Challenger Strategies I
GEOGRAPHIC SCOPE
Segment
INDUSTRY Industry
SCOPE
Segment
INDUSTRY
SCOPE Industry
Finance Marketing
and Control
GOALS
Purchasing Distribution
Labor Manufacturing
Barriers and Profitability
EXIT BARRIERS
Low High
ENTRY
BARRIERS
Return on
Investment
Market Share
Firm‘s Strategic Needs to Remain in the
Business
Favorable
Leadership Harvest
Industry
Structure or or
for Decline Niche Divest Quickly
Unfavorable
Industry Niche
Structure or Divest Quickly
for Decline Harvest
Five Forces Determining Segment
Structural Attractiveness
Criteria
• Size
• Market Growth, Pricing
• Market Diversity
• Competitive Structure
Industry Attractiveness • Industry Profitability
High Medium Low • Technical Role
• Social
• Environmental
• Legal
High • Human
Criteria
Business Unit Position
• Size
• Growth
• Share
• Position
• Profitability Medium
• Margins
• Technical Position
• Strengths/Weaknesses
• Image
• Pollution Build
• People
Low Hold
Harvest
The Quest for Competitiveness
CUSTOMER TYPES
Served Unserved
Articulated
NEEDS
Unexploited
Unarticulated
Opportunities
Why do Great Companies Fail?
Concentrating
Recovering
Managing Migration Paths
Creating
and Managing
Coalitions
Learning
Investing and
in Core Experimentation
Competencies in the Market
Setting
Standards
and Building Global
Influencing Brand and
Regulation Distribution
Establishing the Core Competence
Agenda
MARKET
Existing New
Banner
Brand
Business
Units
Core
Products
(Platforms)
Core
Competencies
Criteria for Integration Decisions
Transaction Coordination
Setup Costs Risk
Costs Effectiveness
Quality
Vertical Market Structures
NUMBER OF BUYERS
Buyers No one
Many
dominate dominates
NUMBER
OF Few
SELLERS High
trading Sellers
risk dominate
One
Transaction-Asset Matrix
Low High
TRANSACTION
FREQUENCY
Vertical integration
Standardized
(e.g., bauxite,
Often transactions
specialized auto
(e.g., groceries)
components)
Primary Influence Processes
BROAD ENVIRONMENT
Global Global
Economic Political/Legal
Forces Forces
Competitors Customers
Suppliers Financial
Intermediaries
The
Organization
Government
Activist
Agencies and
Groups
Administrators
Local
Unions
Communities
OPERATING ENVIRONMENT
Sociocultural Technological
Forces Change
The Product Life Cycle
Introduction Growth
Unit
Sales A
Volume
B
Time
Note: A = Moderate Growth, B = Commodity, C = Decline
Internal Venturing Alternatives
STRATEGIC IMPORTANCE
High Control/
No Control/
No Operational
No Operational
Coupling
Unrelated Coupling
Special Business
Complete Spinoff
Units
OPERATIONAL
IMPORTANCE No Control/
High Control/ Strong Operational
Strong Operational Coupling
Related Coupling
Nurturing and
Direct Integration Contracting
The Boston Consulting Group Matrix
18%
12%
BUSINESS
GROWTH 10%
RATE
8%
Cash Cows Dogs
6%
4%
2%
10X 4X 2X1.5X 1X .5X .2X .1X
COMPETITIVE POSITION
Low
INDUSTRY Medium
ATTRACTIVENESS
High
The Top-Down Control Cycle
Results
The Bottom-Up Empowerment Cycle
Satisfying Customers
to learn and make changes that
continuously improve processes Feedback
capable of
Workforce
to be responsive (listen) and
flexible (change quickly) by
empowering the
Companies
to choose among global
opportunities and requires
Read Customers
up
from empowers
here Ownership of Information
The Internal Diversification Process
Diversification
Decision
Search and Idea
Desire to expand into a Generation
Selection, Review,
broad area acceptable
to key stakeholders Development of and Development
Institutionalization
specific new business
proposals based on Ongoing selection of
Test marketing and
existing knowledge new products for
commercialization
fused with newly funding
developing
knowledge
Designs for Organizational
Entrepreneurship
STRATEGIC IMPORTANCE
Very Important Uncertain Not Important
3. 6. 9.
High Control/ Moderate Control/ No Control/
No Operational No Operational No Operational
Unrelated Coupling Coupling Coupling
Remote Environment
(Global and Domestic)
• Economic
• Social
• Political
• Technological
• Ecological
Industry Environment
(Global and Domestic)
• Entry barriers
• Supplier power
• Buyer power
• Substitute availability
• Competitive rivalry
Operating Environment
(Global and Domestic)
• Competitors
• Creditors
• Customers
• Labor
• Suppliers
THE FIRM
Forces Driving Industry Competition
Potential Entrants
Threat of
new entrants
Industry
Bargaining power Bargaining power
competitors
of suppliers of buyers
Suppliers Buyers
Rivalry among
existing firms
Threat of
substitute products
or services
Substitutes
International Strategy Options I
LOCATION OF ACTIVITIES
Geographically Geographically
dispersed concentrated
COORDINATION
OF ACTIVITIES
Country-centered strategy
by multinationals with Export-based strategy
Low a number of domestic firms with decentralized
operating only one marketing
country
International Strategy Options II
High
Joint Foreign Foreign
venture branch subsidiary
Joint
Export Licensing/ venture
Low
Low High
MARKET COMPLEXITY
SWOT Analysis Diagram
Numerous
environmental
opportunities
Cell 3: Cell 1:
Supports a turnaround- Supports an
oriented strategy aggressive strategy
Critical Substantial
internal internal
weaknesses strengths
Cell 4: Cell 2:
Supports a Supports an
defensive strategy diversification strategy
Major
environmental
threats
Decay of New Product Ideas
60
Screening
55
Business analysis
Commercialization
NUMBER OF 20 Development
IDEAS
One successful
15
new product
Testing
10
10 20 30 40 50 60 70 80 90 100
Overcome
weaknesses
Maximize
strengths
BCG‘s Growth/Share Matrix I
High Low
High
E Divest
B
D
MARKET GROWTH RATE
Low C
G Divest
REAL
MARKET 10%
GROWTH
Cash generating
High Dog businesses
businesses
Underlying Relationship between ROI
and Market Share in the New BCG Matrix
Small Large
Stalemate Volume
ROI ROI
Few
Many
Development
A
C
Growth B
D
THE INDUSTRY‘S STAGE Competitive
shakeout F
IN THE EVOLUTIONARY
LIFE CYCLE
E
Maturity
Saturation
G
H
Decline
McKinsey 7-S Framework
Strategy
Structure Systems
Shared Values
(culture)
Skills Style
(management) (leadership)
Staff
(management)
Managing the Strategy-Culture
Relationship
High Low
Capital-
Capital
investment
budget
requirement
Expenditure budgets
and schedules
Budgets and schedules in
Success
Mission,
Window Strategy goals, and
of objectives
opportunity s
ra tion cy)
pe en
an d o effici
tics and
Tac veness
ecti
(eff Competitive
advantage
Distinctive
competence,
comparative
advantage
Failure
Strategic, Tactical, and Operational Views
at Various Organizational Levels
Strategic
Upper Tacti
cal
management Ope
ra
tio
na
l
Middle Strategic
management Tacti
Op cal
er
at
io
na
l
First-line suppervisory
employees
Strategic
O T actic
pe al
ra
tio
t0 na t+1 t+2+5
l
PLANNING HORIZON
Greiner‘s Five-Phase Growth Model
4. Crisis of
RED TAPE 5. Growth through
COLLABORATION
3. Crisis of
CONTROL 4. Growth through
SIZE OF
ORGANIZATION COORDINATION
2. Crisis of
AUTONOMY
3. Growth through
1. Crisis of DELEGATION
LEADERSHIP
2. Growth through
DIRECTION Evolution stages
Case 1
Little Business A
competition Resource K Intense
Customer X
for Resource L competition
Customer Y for
resources Resource M Customer Z
Business B customers
Case 2
Customer X
Intense b A
Business Customer Y
competition Resource M Customer Z Little
for Resource N competition
resources Resource O Customer J for
Business B Customer K customers
Customer L
Intensity of Competition
COMPETITION
FOR Moderate pressure
RESOURCES (marketing) Little competitive
Minimal
Case 1 pressure
Intense Minimal
Value and the Price-Performance Curve
High
Lesser value
Premium
Loser
Good
RELATIVE
Average
PRICE
Economy Winner
Low
Low High
RELATIVE QUALITY
Functional Strategy Areas
Design strategies
• Product/service research
• Product/service development
Delivery strategies
• Pricing
Processing strategies • Promotion
Sourcing strategies • Process development
• Procurement • Channels
• Operations and productivity • Sales
• Resources • Fabrication • Distribution
• Assembly • Service
Supporting strategies
• Planning and control
• Training and development
• Maintenance
• Legal
• Etc.
Basic Organizational Forms for
Multinational Operations
Degree of
parent company Organizational Form Main Characteristics
control
Low
Flexible capital commitment
Relatively easy entry
Joint ventures Local commitment
Good opportunity for long-term profits
Acquisition of local knowhow and
management skills
Substantial
Risk of expropriation or discriminatory
action
Subsidiary operations Large capital commitment
Long-term profit potential is high but
so is risk
Close control over operations
Almost complete
Types of Acquisitions
Vertical
integration
Concentric
diversification Mining Horizontal
diversification
Steel Steel
Aluminium ingot ingot
ingot producer producer
producer A B
Steel Electronics
frabricator company
Unrelated
diversification
Strategic Options and the Life Cycle
PRODUCT/MARKET STAGE
Embryonic Aging
or or
introduction Growth Maturity decline
Dominant
Strong
Wide range of
strategic
COMPETITIVE Favorable options
POSITION
ment
p
elo
e dev
Tenable
le ctiv
se
ti on, Danger zone,
u
Ca Retreat to niche,
Weak withdraw, or liquidate
Attractiveness/Competitive Position
Strategies
COMPETITIVE POSITION
Technology change
• Firm capabilities
• Technology
• Structure, systems
and people
Run Team-up
Customer Competition
preferences and
expectations Globalization
Macro-economic
Value Propositions Across Four
Quadrants
Collaborate Create
Innovation
Capability • Focuses on innovation in products,
• Focuses on developing abilities processes and services
• Creates a sustainable advantage • Creates growth and industry leadership
Market awareness
Efficiency • Focuses on competitive advantage through
• Focuses on improving process efficiency agility and market awareness and speed
• Creates better products more cheaply • Creates asset productivity and shareholder value
Control Compete
The Ansoff Matrix
Existing New
New
Market product
Existing penetration development
MARKETS
Market
New development Diversification
The Customer Growth Matrix
Existing New
Customer Customer
Existing loyalty extension
CUSTOMERS
Customer Customer
New acquisition diversification
Combining Elements of the Customer
Growth Matrix
Existing New
Loyalty
Customer through Customer
Existing loyalty extension
extension
Acquisition
CUSTOMERS through
referral
Customer Customer
New acquisition diversification
Conceptual Model for the Evaluation of
Product Innovation Projects
PROJECT ENVIRONMENT
parent holding
organization subcontractors organization
PROJECT
Alternative Aims in Various Stadia of
Product Development
MARKET
COMMITMENT OF RESOURCES
Core Competence Management Model
Distinctive
assets
Raw materials
Country-specific
Co-specialized
assets
Company-specific
Product positioning with
Internal learning intended competitive advantages
Internal alignment
Learning from Competitive dynamics Learning from
resource markets External interpretation output markets
Flexible
recipes and
routines
CORE
COMPETENCES
TECHNICAL
RISK
Very Technically
safe safe
(Minimal (Moderate
Management Management
Involvement) Involvement)
Low
Low High
BUSINESS RISK
Typical Industry Experience Curve
Strategies
Retail Banking
Manufacturing Distribution
The Cycle of Timing/Know-How
Competition
The Firm builds a Technological Escalating Costs
Resource Base and Risks on
to Create Advantage Each Cycle
Followers Imitate Products and Overcome Switching Costs and Brand Loyalties
Price War
Disruption and the New 7-S’s
VISION PLANNING
Rapid
Evolutionary Revolutionary
Existing
Competition Competition
CUSTOMER
NEEDS
SERVED
Niche Market
New Creation Creation
The Cycle Price-Quality Competition –
Moving up an Escalation Ladder II
Core Risk to
Values be avoided
Business
Strategy
Strategic Critical
Uncertainties Performance
Variables
DELEGATION OF
RESPONSIBILITY
Entrepreneurial Bureaucratic
Low Management Management
Low High
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