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Strategic Analysis
 

Strategic Analysis

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    Strategic Analysis Strategic Analysis Presentation Transcript

    • Strategic Analysis
      • Value Chain
      • Competitive Model
      • Industry Structure
      • Strategic Option Generator
    • Application Problem Apple Computer Inc. announced in May 2001 that it was expanding into the retail business, confirming that it had planned to open its first store on May 19, 2001. A computer industry analyst predicted that the company might open as many as 10 stores as part of a strategy to extend the Apple brand. By May 2002, Apple had actually opened 30 stores across 16 states in the U.S. The retail strategy in general indicates that Apple is undaunted by the recent retrenchment of Gateway Computer , a predominantly mail-order company that has scaled back its retail plans. At the same time, Apple, which traditionally has relied on third-party retailers, has fared well going directly to consumers on its Internet store. Lynn Fox, an Apple spokeswoman, said Internet-based sales represented over 25 percent of the company's revenue in recent quarters. In the case of Gateway, the company announced plans last month to close 38 under performing stores and to take a charge of $75 million, leaving it with about 300 stores. The company is also removing its sales stands from 1,000 OfficeMax stores. In general, Apple has been hit by the downturn in the personal computer market. At the time Apple entered the off-line retailing arena, it announced second-quarter earnings that slightly exceeded expectations, but in the first quarter, the company reported its first loss since Steven P. Jobs, the company's co-founder and current chief executive, returned to Apple three years ago. 1.      Is Apple’s decision to open retail stores represent a strategic shift? Why or why not? 2.      Does this move create / enhance Apple’s competitive advantage? Positional or capability-driven or both? 3.      What potential risks does this move entail for Apple? 4. Would you characterize this move as exploratory or exploitative? What would be the critical success factors?
    • Porter’s Value Chain
      • How do we create value for customers?
      • Primary activities directly create value
      • Support activities help create value
      • Value added = output value – input value
    • The Value Chain Support activities Corporate infrastructure Human resource management Technology development Procurement Inbound logistics Primary activities Operations Outbound logistics Marketing and sales Service Margin
    • Four Support Activities Function or purchasing input. Procurement Improving product / process Technology development Hiring, training, & development. Human resource management General management Corporate infrastructure Internet Application Description Support Activities
    • Five Primary Activities Internet Application Description Primary Activity Customer service Service Promotion and sales force. Marketing and sales Store & distribute products. Outbound logistics Transform inputs into products. Operations Receive, store, and distribute. Inbound logistics
    • Airline Industry Value Chain INBOUND LOGISTICS OPERATIONS OUTBOUND LOGISTICS MARKETING AND SALES SERVICE PROCUREMENT TECHNOLOGY DEVELOPMENT HUMAN RESOURCE MANAGEMENT FIRM INFRASTRUCTURE Financial Accounting Policy Regulatory Compliance Legal Community Affairs Pilot Training Safety Training Agent Training In-flight Training Baggage Tracking System
      • Promotion
      • Advertising
      • Advantage
      • Program
      • Travel Agent
      • Programs
      • Group Sales
      • Ticket Counter
      • Operations
      • Gate Operations
      • Aircraft
      • Operations
      • On-board Service
      • Baggage Handling
      • Ticket Offices
      • Route Selection
      • Passenger Service
      • System
      • Yield Management
      • System (Pricing)
      • Fuel
      • Flight Scheduling
      • Crew Scheduling
      • Facilities Planning
      • Aircraft Acquisition
      Information Technology Communications Product Development Market Research
      • Lost Baggage Service
      • Complaint Follow-up
      • Baggage System
      • Flight
      • Connections
      • Rental Car and
      • Hotel Reservation
      • System
      Computer Reservation System, In-flight System, Flight Scheduling System, Yield Management System Baggage Handling Training Flight, route and yield analyst training
    • The Value Chain Support activities Corporate infrastructure Human resource management Technology development Procurement Inbound logistics Operations Outbound logistics Marketing and sales Service Margin Pre-Internet: Materials flow paramount With Internet: Information flow equally important Information Primary activities Information
    • Value Analysis Questions
      • Clarifying Value Chain Statements
          • Can we improve our supply chain and or distribution system to increase inventory turns?
          • Can we realize significant margins by consolidating parts of the value chain to my customers?
      • Creating New Values
          • Can we improve customer service?
          • Can we use our ability to attract customers to increase revenue thru cross-sales or up-sales?
    • Strategic Analysis
      • Value Chain
      • Competitive Model
      • Industry Structure
      • Strategic Option Generator
    • Industry Competitors Intensity of rivalry Suppliers Buyers New entrants Substitutes Bargaining power of suppliers Bargaining power of buyers Threat of substitutes Threat of entrants Elements of Industry Structure
      • Entry Barriers
      • Economies of scale
      • Proprietary product differences
      • Brand identity
      • Switching costs
      • Capital requirements
      • Access to distribution
      • Absolute cost advantages
      • Proprietary learning curve
      • Access to necessary inputs
      • Government policy
      • Expected retaliation
      • Rivalry Determinants
      • Industry growth
      • Fixed (or storage) cost/Value added
      • Intermittent overcapacity
      • Product differences
      • Brand identity
      • Switching costs
      • Concentration and balance
      • Informational complexity
      • Diversity of competitors
      • Corporate stakes
      • Exit barriers
    • Relative price performance of substitutes Determinants of Substitution Threat Switching costs Buyer propensity to substitute
    • Determinants of Buyer Power Pull-through Decision-makers’ incentives Substitute products Buyer profits Ability to backward integrate Impact on quality/Performance Buyer information Brand identity Buyer switching costs relative to firm switching costs Product differences Buyer volume Price/Total purchases Buyer concentration versus firm concentration Price Sensitivity Bargaining Leverage
      • Determinants of Suppliers Power
      • Differentiation of inputs
      • Switching costs of suppliers and firms in the industry
      • Presence of substitute inputs
      • Supplier concentration
      • Importance of volume to supplier
      • Cost relative to total purchases in the industry
      • Impact of inputs on cost or differentiation
      • Threat of forward integration relative to threat of backward integration by firms in the industry
    • Impact of Competitive Forces Force Implication Potential Uses of IT to Combat Force Threat of new entrants Buyers’ bargaining power Suppliers’ bargaining power Threat of substitute products or services Traditional intraindustry rivals New capacity Substantial resources Reduced prices or inflation of incumbent’s costs Prices forced down High quality More services Competition encouraged Prices raised Reduced quality and services (labor) Potential returns limited Ceiling on prices Competition: Price Product Distribution and service Provide entry barriers: Economies of scale Switching costs Product differentiation Access to distribution channels Buyer selection Switching costs Differentiation Entry barriers Supplier Selection Threat of backward integration Improve price/performance Redefine products and services Cost-effectiveness Market access Differentiation: Product / Services / Firm Porter and Millar
    • Limitations of the Five Forces Model
      • Manufacturing rather than service focus
      • Some support functions (IT) are integral part of primary activities
      • Adversarial relations, no cooperation
      • Complementors, outsourcers, partners?
    • Strategic Analysis
      • Value Chain
      • Competitive Model
      • Industry Structure
      • Strategic Option Generator
    • What Is an Industry?
      • Firms may make multiple lines of products / services
      • We can define an industry in terms of close substitutes.
      • Complementary products belong to different industries if sold separately!
      Industry Value Chain Suppliers Manufacturer Distribution
    • Industry Structure: Before Wal-Mart Intra-Industry Rivalry Rivals: Kmart, Sears, Specialty Stores Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of Entrants
      • Consumers
      • in Small Town U.S.A.
      • Consumers in Metropolitans
      • Areas in the U.S.
      • Mail Order
      • Buying Clubs
      • U.S. Product Manufacturers
      • Foreign Manufacturers
      • I/T Suppliers
      • Foreign General Merchandisers or Discounters
      • Established Retailer Shifting Strategy to Discounting or Megastores
      • Telemarketing
      • Door-to-door Sales
    • Industry Structure: After Wal-Mart Intra-Industry Rivalry Rivals: Kmart, Target, Sears, Toys R Us, Specialty Stores Bargaining Power of Buyers Bargaining Power of Suppliers Threat of Substitutes Threat of Entrants
      • Consumers
      • in Small Town U.S.A.
      • Consumers in Metropolitans
      • Areas in the U.S.
      • Mail Order
      • Home Shopping Network
      • Electronic Shopping
      • U.S. Product Manufacturers
      • Foreign Manufacturers
      • I/T Suppliers
      • Foreign General Merchandisers or Discounters
      • Established Retailer Shifting Strategy to Discounting or Megastores
      • Telemarketing
      • Buying Clubs
      • Door-to-door Sales
    • Seller Seller Original Intermediary Original Intermediary Buyer Buyer Channel Facilitator: autobytel.com Channel Facilitator vs. Channel Competitor Channel Competitor: Southwest
    • How does the Internet alter industry structure?
      • Buyer Power
      • Supplier Power
      • Threat of New Entrants
      • Threat of Substitutes
      • Rivalry
    • Emergence Growth Maturity Decline Time IndustrySales The Industry Life Cycle
    • The Industry Life Cycle: Caveats
      • Many unexpected turns can occur
      • Maturing industry begins to grow with new technology or use
      • Growing industry begins to decline as substitutes appear
      • Rate of change differs across industries
      • Automobiles versus PCs
      • B2C & B2B
    • The Industry Life Cycle Stages Emergence: One among many approaches succeed Maintain focus in the face of uncertainty Internet Gold Rush 1999-2000 Growth: From vision to production and distribution Consolidation and scale up New entries, yet muted competition! Maturity & Decline: Entrenched leaders Dwindling customer base Profit still possible
    • Competitive Rivalry from Existing Firms Technology Regulatory Environment Changing Social Values Substitutes Suppliers Buyers New Entrants Economic Changes Demographic Changes External Forces Affecting Competition
    • Strategic Analysis
      • Value Chain
      • Competitive Model
      • Industry Structure
      • Strategic Option Generator
    • Strategic Thrusts (Advantage)
      • Cost: Reduce cost for same output
      • Differentiation: Unique and appealing
      • Innovation: New products, new processes
      • Growth: Size is often a must
      • Alliance: Can’t do it all, who may join hands?
      • Segment: Size of market segment
      • Vertical: Make vs. Buy decisions
      • Geographic: Parts of domestic / foreign markets
      • Industry: Range of related industries
      Competitive Scope
    • Competitive Strategy: Mode
      • Offensive — usually takes place in an established competitor’s market
      • Defensive — takes place in the firm’s own current market position as a defense against possible attack by a rival
      • Cooperative — partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial
    • TARGET CUSTOMER COMPETITOR SUPPLIER THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE DIRECTION OFFENSIVE DEFENSIVE INTERNAL EXTERNAL EXECUTION COMPETITIVE ADVANTAGE Source - Wiseman: Strategy and Computers: Information Systems as Strategic Weapons, Richard D. Irwin. Strategic Option Generator COOPERATIVE
    • TARGET CUSTOMER COMPETITOR SUPPLIER THRUST DIFFERENTIATION COST INNOVATION GROWTH ALLIANCE MODE DIRECTION OFFENSIVE DEFENSIVE INTERNAL EXTERNAL EXECUTION COMPETITIVE ADVANTAGE Federal Express: Absolutely Positively Overnight Source - Wiseman: Strategy and Computers: Information Systems as Strategic Weapons, Richard D. Irwin. COOPERATIVE
      • Change basis of competition to disadvantage
      • Lower entry barrier
      • Bring on litigation or regulation
      • Increase power of customers or suppliers
      Risks Of Strategic Systems (Logic?)
    • Classical Strategic Planning Model Business Plan Tactical Plan Strategic Plan Environment (External) Opportunities Threats Strengths Weaknesses Enterprise (Internal) Goals Objectives Strategy Formulation Culture / Values Business Unit Functional Programs Major Projects Detailed Projects Resources: Headcount, Capital and Expense Budgets Mission Vision
    • EC Strategy
      • What questions should a strategic plan answer?
        • How is Electronic Commerce going to change our business?
        • How do we uncover new types of business opportunities?
        • How can we take advantage of new electronic linkages with customers and trading partners?
        • Will intermediaries be eliminated in the process? Or do we become intermediaries ourselves?
        • How do we bring more buyers together electronically (and keep them there)?
        • How do we change the nature of our products and services?
        • How is the Internet affecting our industry structure?
        • How do we manage and measure the evolution of our strategy?