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Welcome to business strategy Welcome to business strategy Presentation Transcript

  • Welcome to Business Strategy Prepared by Mr. M. S. Halder Chairperson BBA Department
  • Jesus, sweet Jesus What a wonder you are You are brighter than the morning star You are fairer, much fairer, than the lily grows by the way side. Precious more precious than gold. I live for Jesus day after day, I live for Jesus then come what may The Holy Spirit I will obey I live for Jesus, day after day
  •  Jesus, sweet Jesus, what a wonder you are You’re brighter than the morning star. You’re fairer, much fairer Than the lily that grows by the wayside Precious, more precious than gold. (2)  You’re the Rose of Sharon, You’re the fairest of the fair. You are all my heart could ever desire; Jesus, Sweet Jesus, what a wonder you are, You’re precious, more precious than gold.  Jesus, sweet Jesus, what a wonder you are You’re brighter than the morning star. You’re fairer, much fairer Than the lily that grows by the wayside Precious, more precious than gold. (2)
  • Heaven Came Down / O What A Wonderful, Wonderful Day 1. O what a wonderful, wonderful day, day I will never forget; After I'd wandered in darkness away, Jesus my Savior I met. O what a tender, compassionate friend, He met the need of my heart; Shadows dispelling, with joy I am telling, He made all the darkness depart. Chorus Heaven came down and glory filled my soul, (filled my soul) When at the cross the Savior made me whole; (made me whole) My sins were washed away and my night was turned to day, Heaven came down and glory filled my soul! (filled my soul)
  • 2. Born of the Spirit with life from above into God's family divine, Justified fully thru Calvary's love, O what a standing is mine! And the transaction so quickly was made, when as a sinner I came, Took of the offer, of grace He did proffer, He saved me, O praise His dear name! Chorus Heaven came down and glory filled my soul, (filled my soul) When at the cross the Savior made me whole; (made me whole) My sins were washed away and my night was turned to day, Heaven came down and glory filled my soul! (filled my soul)
  • 3. Now I've a hope that will surely endure after the passing of time; I have a future in heaven for sure there in those mansions sublime. And it's because of that wonderful day, when at the cross I believed; Riches eternal and blessings supernal, from His precious hand I received. Chorus Heaven came down and glory filled my soul, (filled my soul) When at the cross the Savior made me whole; (made me whole) My sins were washed away and my night was turned to day, Heaven came down and glory filled my soul! (filled my soul)
  • Course Requirements Participate all the class lectures 2. Reading Report everyday Based on: a. Business e. Technology b. Finance f. Business current issues c. Strategy g. Contemporary issues d. Economics h. Business world 3. Unannounced quizzes or tests will be there. 5. Projects will be given. Projects on: 1. “STRATEGY FORMATION TO IMPLEMENTATION AND EVALUATION”
  • Guidelines are: a. What is strategy? Why there is a need of strategy formation? b. The basic elements of strategy formation c. The reasons for strategy formation. d. The affect of making different strategy for different task purposes. e. Different kinds or types of strategy and their uses to business f. A case study should be included that will reflect the strategy formulation to evaluations. g. What is strategy Implementation and evaluation h. Different methods of making an evaluation form i. Conclusion
  • 6. Course Compendium will be given for supplementary resources. 7. Mid-term exam will be conducted for 50 minutes 8. Final-final exam will be conducted for 2 hours (case study will be included) 9. Fully need to be utilized the time to learn the given course. 10. Final grade will be determined based on all the activities which will be performed.
  • Chapter 1 Definition of Strategy According to Webster’s New World Dictionary, “ the science of planning and directing military operations.” According to Alfred Chandler, “the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”
  • According to James B. Quinn of Dartmouth College, “strategy is the pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole.” According to William F. Glueck, “strategy is a unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.
  • According to Mintzberg, “the role of planning ignore the fact that strategies can emerge from within an organization without any formal plan. Also he pointed the definition that is, “strategy as a pattern in a stream of decisions or actions, the pattern being a product of whatever intended (planned) strategies are actually realized and of any emergent (unplanned) strategies.
  • Henry Mintzberg
  • Components of Strategic Management 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Mission and Major Goals External Analysis Internal Analysis Strategic Choice Business-Level Strategy Corporate-Level Strategy Analyzing the Corporate Portfolio Designing Organizational Structure Choosing Integration and Control Systems Matching Strategy, Structure, and Controls Conflict, Politics, and Change Feedback
  • 1. Mission and Major Goals The mission and major goals of an organization exists and what it should be doing. For example, the mission of national airline might be defined as satisfying the needs of individual and business travelers for high-speed transportation at a reasonable price to all the major population centers of North America.
  • Major goals specify what the organization hopes to fulfill in the medium to long term. Most profit-seeking organizations operate with a hierarchy of goals in which the maximization of stockholder wealth is placed at the top. Goals are objectives judged necessary by the company if it is to maximize stock-holder wealth.
  • The factors of Mission Statements are: 1. 2. 3. 4. 5. Defining the business Purpose of the business Functions of the business Existence Accomplishments
  • The relationship between mission, stakeholders, and strategies Strategy Formulation Guided by Mission Statement Inside Claimants Executive Officers BOD Stockholders Employees Mission Statement Busi.Def. Major Goals Philosophies Outside Claimants Customers Suppliers Govt. Unions Competitors Local Communities General Publics
  • Assignments 1. Write down the BASC Mission Statements 2. Write down the BBA Mission Statements 3. Write down an imaginary company’s mission statements.
  • 2. External Analysis The objective of external analysis is to identify strategic opportunities and threats in the organization’s operating environment. Analyzing the industry environment involves an assessment of the competitive structure of the organization’s industry, including the competitive position development.
  • Analyzing the macro-environment consists of examining macro-economic, social, government, legal, international, and technological factors that may affect the organization. For example, Royal Dutch/Shell, its external opportunities included the OPEC oil cartel reaching a sustainable agreement to restricts oil production.
  • 3. Internal Analysis Internal analysis serves to pinpoint the strengths and weaknesses of the organization. The factors that determine the quantity and quality of an organization’s resources in manufacturing, marketing, materials management, research and development, information systems, personnel, and finance.
  • For example, if a company’s businesses are concentrated in highly competitive and unprofitable industries, then the balance is a weakness. Conversely, if its businesses are concentrated in very profitable industries, then the balance is a strength.
  • 4. Strategic Choice  This components involves generating a series of strategic alternatives, given the goals of the firm, its internal strengths and weaknesses, and external opportunities and threats.  The comparison of strengths, weaknesses, opportunities, and threats is normally referred to as a SWOT analysis.  A SWOT analysis might generate a series of strategic alternatives.
  •  To choose among the alternatives, the organization has to evaluate them against each other with respect to their ability to achieve major goals.  The objective is to select the strategies that ensure the best alignment, or fit, between external environmental opportunities and threats and the internal strengths and weaknesses of the organization.
  •  For a single-business organization, the objective is to match the company’s strengths to environmental opportunities in order to gain a competitive advantage and thus increase profits.  For a multi-business organization, the goal is to choose for its portfolio of business strategies that align the strengths and weaknesses of the portfolio with environmental opportunities and threats.
  • 5. Business-Level Strategy   1. 2. 3. A strategy that helps to make a business to be progressed. Three generic business-level strategies: Cost leadership Differentiation Particular market niche
  •  Cost leadership is a concept developed by Michael Porter, used in business strategy. It describes a way to establish the competitive advantage. Cost leadership, in basic words, means the lowest cost of operation in the industry.[1]  The cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience (learning curve). A cost leadership strategy aims to exploit scale of production, well defined scope and other economies (e.g. a good purchasing approach), producing highly standardized products, using high technology.
  • In the last years more and more companies choose a strategic mix to achieve market leadership. This patterns consist in simultaneous cost leadership, superior customer service and product leadership.
  • Cost Leadership…  Cost leadership is different from price leadership. A company could be the lowest cost producer, yet not offer the lowestpriced products or services. If so, that company would have a higher than average profitability.  However, cost leader companies do compete on price and are very effective at such a form of competition, having a low cost structure and management.
  • Differentiation Approach under which a firm aims to develop and market unique products for different customer segments. Usually employed where a firm has clear competitive advantages, and can sustain an expensive advertising campaign.
  • It is one of three generic marketing strategies (see focus strategy and low cost strategy for the other two) that can be adopted by any firm. See also segmentation strategies.
  • Particular market niche A niche market is the subset of the market on which a specific product is focusing. So the market niche defines the specific product features aimed at satisfying specific market needs, as well as the price range, production quality and the demographics that is intended to impact. It is also a small market segment. For example, sports channels like STAR Sports, ESPN, STAR Cricket, and Fox target a niche of sports lovers
  • Every product can be defined by its market niche. As of special note, the products aimed at a wide demographic audience, with the resulting low price (due to price elasticity of demand), are said to belong to the mainstream niche in practice referred to only as mainstream or of high demand. Narrower demographics lead to elevated prices due to the same principle.
  •  So to speak, the niche market is a highly specialized market aiming to survive among the competition from numerous super companies. Even established companies create products for different niches, for example, Hewlett-Packard has all-in-one machines for printing, scanning and faxing targeted for the home office niche while at the same time having separate machines with one of these functions for big businesses.
  • In practice, product vendors and trade businesses are commonly referred as mainstream providers or narrow demographics niche market providers (colloquially shortened to just niche market providers). Small capital providers usually opt for a niche market with narrow demographics as a measure of increasing their financial gain margins.
  • Nevertheless, the final product quality (low or high) is not dependent on the price elasticity of demand; it is associated more with the specific needs that the product is aimed at satisfying and, in some cases, aspects of brand recognition (e.g., prestige, practicability, money saving, expensiveness, planet environment conscience,
  • 6. Corporate-Level Strategy  An organization’s corporate-level strategy must answer this question: what businesses should we be in to maximize the long-run profitability of the organization?  Competing successfully within a single business area also often involves vertical integration and global expansion.  Organization that are successful at establishing a sustainable competitive advantage may find that they are generating resources in excess of their investment requirements within their primary industry.
  •  For such organizations, maximizing longrun profitability may entail diversification into new business areas.  The strategies of vertical integration, global expansion, and diversification fall under the rubric of corporate-level strategies.
  • 7. Analyzing the Corporate Portfolio  Substantially diversified companies face the problem of how best to make sense out of their many different activities. For example, General Electronic has more than 100 different business units.  Portfolio analysis may indicate that a company needs to leave some existing business areas or enter new ones.  A number of different entry and exit strategies are available.
  •  The options for entering new businesses include acquisitions, joint ventures, and internal new venturing.  The options for exciting from an existing business include harvest, divestment, and liquidation.
  • What is Acquisition? 1. In business, an acquisition is when one company purchases another. 2. In marketing, customer acquisition is the process of gaining customers.
  • Joint Venture     A joint venture takes place when two parties come together to take on one project. In a joint venture, both parties are equally invested in the project in terms of money, time, and effort to build on the original concept. While joint ventures are generally small projects, major corporations also use this method in order to diversify. A joint venture can ensure the success of smaller projects for those that are just starting in the business world or for established corporations. Since the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as the resulting profits.
  • Divestment The process of selling an asset. Also known as divestiture, it is made for either financial or social goals. Divestment is the opposite of investment.
  • Liquidation   Liquidation is the process of taking a business' real assets and turning them into cash, either to pay off debt or to reap a personal profit. Liquidation may be done either voluntarily by a company or individual, or in response to a declaration of bankruptcy as a way of repaying a portion of debtors. Compulsory liquidation is ordered by a court, and the laws vary in different countries. Usually a court-appointed receiver takes over to analyze the company's assets and determine the best way to handle them. Originally, recovered cash from a compulsory liquidation was distributed evenly amongst debtors. Now certain debtors may take precedence over others, depending on the terms of the loans.
  •   Voluntary liquidation may be done for a number of reasons. Some companies elect to undergo liquidation while their assets still outweigh their liabilities, if they believe their business will continue to degrade. By selling off assets early, these corporations may pay off debtors and still give a final dividend to shareholders. A corporation with liabilities outweighing assets ay also undergo voluntary liquidation, expecting a compulsory liquidation should they fail to pay off a significant portion of their debt. This type of voluntary liquidation is considered an appropriate response to an insolvent situation.
  • Diversification?  Diversification is the process of investing a portfolio across different asset classes in varying proportions depending on an investor’s time horizon, risk tolerance, and goals.  While diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses, this disciplined approach does help alleviate some of the speculation that is often involved with investing. Primary asset classes include domestic equity, foreign equity, and fixed income.
  • Vertical Integration   In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or (market-specific) service, and the products combine to satisfy a common need. It is contrasted with horizontal integration. Vertical integration is one method of avoiding the hold-up problem. A monopoly produced through vertical integration is called a vertical monopoly.
  • Global Expansion Sources of Competitive Advantage from a Global Strategy A well-designed global strategy can help a firm to gain a competitive advantage. This advantage can arise from the following sources:
  • Efficiency     Economies of scale from access to more customers and markets Exploit another country's resources - labor, raw materials Extend the product life cycle - older products can be sold in lesser developed countries Operational flexibility - shift production as costs, exchange rates, etc. change over time Strategic    First mover advantage and only provider of a product to a market Cross subsidization between countries Transfer price
  • Risk  Diversify macroeconomic risks (business cycles not perfectly correlated among countries)  Diversify operational risks (labor problems, earthquakes, wars) Learning  Broaden learning opportunities due to diversity of operating environments Reputation  Crossover customers between markets - reputation and brand identification
  • 8. Designing Organizational Structure  To make a strategy work, regardless of whether it is intended to emergent, the organization needs to adopt the correct structure.  Choosing a structure entails allocating task responsibility and decision-making authority within an organization.  The issues covered include how best to divide an organization into subunits and how to distribute authority among the different levels of an organization’s hierarchy.
  • 9. Choosing Integration and Control Systems  Strategy implementation involves more than an organization’s choice of structure. It also involves the selection of appropriate organizational integration and control systems.  Strategy implementation often requires collective action or coordination between semi-autonomous subunits within an organization.
  •  An organization must also decide how best to asses the performance and control the actions of subunits.  Its options range from market and output controls to bureaucratic and clan controls.
  • 10. Matching Strategy, Structure, and Controls  Implementing a strategy requires the adoption of appropriate organizational structures and control systems.  Different strategies and environment place different demands on an organization and therefore require different structural responses and control systems.  For example, a strategy of cost leadership demands that an organization be kept simple and that controls stress productive efficiency.
  •  On the other hand, a strategy of differentiating an organization’s product by unique technological characteristics generates a need for integrating the activities of the organization around its technological core and for establishing control systems are very different in these two cases.
  • 11. Conflict, Politics, and Change  Although in theory the strategic management process is characterized by rational decision making, in practice organizational politics plays a key role.  Politics is endemic to organizations: different sub-groups within an organization have their own agendas.  Typically, the agendas of different subgroups conflict.
  •  Thus departments may compete with each other for a bigger share of an organization’s finite resources. Such conflicts may be resolved as much by the relative distribution of power between subunits as by a rational evaluation of relative need.  Power struggles and coalition building are major consequences of such conflicts and clearly play a part in strategic management.
  •  Strategic change tends to bring such power struggles to the fore, since by definition change entails altering the established distribution of power within an organization.
  • 12. Feedback  Strategic management is an ongoing process.  Once a strategy is implemented, its execution must be monitored to determine the extent to which strategy objectives are actually being achieved.  This information passes back to the corporate level through feedback loops. At the corporate it is fed into the next round of strategy formulation and implementation.  It serves either to reaffirm existing corporate goals and strategies or to suggest changes.
  • Strategic Managers chapter 2  Strategic managers are individuals who bear responsibility for the overall performance of the organization or for one of its major self-contained divisions.  Their overriding concern is for the health of the total organization under their direction.  Strategic managers are distinct from functional managers within an organization.
  •  Functional mangers bear responsibility for specific business functions, such as personnel, purchasing, production, sales, customer service, and accounts.  The authority is generally confined to one organizational activity, whereas strategic managers oversee the operation of the whole organization.  This responsibility puts strategic managers in the unique position of being able to direct the total organization in a strategic sense.
  • According to Edward Wrapp of the University of Chicago has given 5 characteristics of successful strategic managers. These are:
  • Major Characteristics of Successful Strategic Managers 1. 2. 3. 4. 5. Well informed Skilled at allocating their time and energy Good politicians Experts at being imprecise/inaccurate Able to push through programs in a piecemeal/disconnected fashion
  • 1. Well informed  Successful strategic mangers keep themselves Well Informed about a wide range of operating decisions being made at different levels of organization.  They develop a network of information sources in many different parts of the organization, which enables them to remain in touch with operating realities.
  • 2. Skilled at allocating their time and energy  Successful strategic managers know how best to Allocate Their Time and Energy among different issues, decisions, or problems.  They know when to delegate and when to become involved in a particular decision.
  • 3. Good politicians  Successful strategic managers are Good Politicians. The play the power game with skill, preferring to build consensus for their ideas, rather than using their authority to force ideas through.  The act as members or leaders of a coalition rather then as dictators.
  • 4. Experts at being imprecise  Successful strategic mangers are able to satisfy the organization that it has a sense of direction within actually committing themselves publicly to precise objectives or strategies.  They are experts at Being Imprecise.  At first glance this skill may seem curious, since so much of the received wisdom in the management literature suggests that part of the job of strategic managers is to set precise objectives and formulates detailed strategies.
  • 5. Able to push through programs in a piecemeal fashion  Successful strategic managers possess is the Ability to Push through programs ina piecemeal fashion.  Successful Strategic managers recognize the futility of trying to push total packages or strategic programs through the organization, since significant objections to at least part of such programs are likely to arise.
  • Levels of Strategic Management chapter 3 1. 2. 3. Corporate Level Business Level Functional Level
  • Corporate Level CEO Board of Directors, Corporate Staff Head Office Business Level Divisional Managers and Staff Functional Level Functional Managers Division A Business Functions Market A Division B Business Functions Market B Division C Business Functions Market C
  • Competitive Changes during Industry Evolution  Over time most industries pass through a series of well-defined stages, from initial growth, through maturity, and eventually into decline.  These stages have different implications for the nature of competition. Specifically, the strength of each of Porter’s five competitive forces typically changes as an industry evolves.
  •  The changes give rise to different opportunities and threats at each stage of an industry’s evolution. The task facing strategic managers is to anticipate how the strength of each force will change with the stage of industry development and to formulate Strategies that take advantage of opportunities as they arise and that counter emerging threats.  The industry life-cycle model is a useful tool for analyzing the effects of industry evolution on competitive forces. The model is similar to the product life-cycle model discussed in the marketing literature.
  •  Using the industry life-cycle model, we can identify five industry environments, each occurring during a distinct stage of an industry’s evolution:
  • 1. An embryonic industry environment, 2. A growth industry environment 3. A shakeout environment 4. A mature industry environment and 5. A declining industry environment
  • 1. An embryonic industry environment An embryonic industry is one that is just beginning to develop (for example, the hand-held calculator industry in the late 1960s). Typically, growth at this stage is slow because of such factors as buyers’ unfamiliarity with the industry’s product, high prices due to the inability of companies to reap any significant scale economies, and poorly developed distribution channels.
  • 2. A growth industry environment  Once demand for the industry’s product begins to lake off, the industry develops the characteristics of a growth industry, In growth industry, first-time demand is expanding rapidly as many new consumers enter the market.  Typically`, industry growth takes off when consumers become familiar with the products, when prices fall because of the attainment of experience and scale economies, and as distribution channels develop. The personal computer industry was at this stage of development between 1981 and 1984. In the United States, 55,000 PCs were sold in 1981. By 1984 the figure had risen to 7.5 million -a 136fold increase in just three years.
  • 3. A shakeout environment  In the shakeout stage, demand approaches saturation levels. In a saturated market, there are few potential first time buyers left. Most of the demand is limited to replacement demand.  A dramatic example of a shakeout occurred in the PC industry during 1984-1986.The average annual growth rate of demand between 1984 and 1986 was 3.3percent, compared with and average annual growth rate of 3,000 percent between 1981 and 1984.
  • 4. A mature industry environment  The shakeout stage ends when the industry enters its mature stage. In a mature industry, the market is totally saturated and demand is limited to replacement demand.  During this stage, growth is low or zero. What little growth there is comes from population expansion bringing new consumers into the market.
  • 5. A declining industry environment  Eventually, most industries enter a decline stage. In the decline stage, growth becomes negative for a variety of reasons, including technological substitution (for example, air travel for rail travel), social changes (greater health consciousness hitting tobacco sales), and demographics (the declining birthrate hurting the market for baby and child products), and international competition (low-cost foreign competition pushing the American steel industry into decline).
  • Assignment on Industry Visitation at least 3 near to BASC Group Areas can be: 1. Kharajora to Chandra 2. Chandra to Safipur 3. Chandra to Nabinagor 4. Kharajor to Kaliakoir 5. Kaliakoir to Mirjapore Etc.
  • Example of one of the group presentation
  • Three Industry Environment Research Group No – 2 Milon Ghorami, Edison Falia, Robert Singh, Kanto Dofo, Urmi Batik March 15, 2010
  • Nayagara Textiles Ltd. General Manager: Muhammad Shahin Miah Type of Organization Main Products Capacity of Production Total Employees Admn Members Collapse year -Corporate - Knits, Garments - 20,000 Kg fabric / day - 4,500 employees -120 - Not yet fall in collapse (Strongly Stated)
  • Sewing Department of Niagara
  • Shihab Jute Spinners Ltd. Manager: Anwar Hossain Type of Organization Main Products Substitute Product Total Employees Admn Members Collapse year -Corporate - Yarn, fiber, wool, - Jute bags and clothes - 1050 -35 - 2007, 2008, 2010 (January- March)
  • Jahanara Spinning Mill Ltd Manager: Md. Moniruzjaman Type of Organization Main Products Substitute Product Total Employees Admn Members Collapse year -Corporate - Thread, Spinning - Nothing - 1500 -27 - 1998, 2003, 2004, 2007
  • Environment Stages Embryonic Stage Growth Stage Shakeout Mature Stage Declining Stage Names of the Company Nayagara Textiles Ltd Jahanara Spinning Mill Ltd Shihab Jute Spinners Ltd. 2001 the company started its embryonic stage and they did not face much problem with the high price, unfamiliarity, uses or not reached to others 1995 – The Jahanara Mill started its embryonic stage. They faced many difficulties with the popularity, machinery problem etc. 2000 – The embryonic stage started. This company also faced problem with the unfamiliarity. The growth of this company was outstanding and still it is holding this growth. Just after opening the company it reached into the peak. 1996-1997 was its growth period. The manager sincerely told us that it took little time for Jahanara Mill to in the the competitive market. 2002 was the real growth stage for the company It is strongly stated that there were no shakeout period for this company. 1998, 2000 it was in the shakeout period In various years they faced the shakeout period. 2004 - 2006 The company is now totally matured. In the year of 2002 the company was quite matured. Not reach in mature stage No declining stages were found according to our research. Due to mechanical and technical inconvenience the company is not earning much profit. But still somehow they are running 2007, 2008, 2010 Andstill they are in decline stages due to many other products came into the
  • End of group 2
  • Introduction: As we visited many companies, we found how over time most industries pass through a series of well-defined stages, from initial growth, through maturity, and eventually into decline. Specifically, the strength of each of Porter’s five competitive forces typically changes as an industry evolves. Based on the Porter’s five forces we made our presentation and visitation.
  • Budget Collection 6 X 35 = 210.00 Tk Expenditures  Traveling Exp. (For appointment) 52.00  Traveling Exp. (For data collection) 52.00  Mobile Exp. 10.00  Printing Exp. 28.00  Entertainment Exp. 60.00 TOTAL EXP. Surplus 202.00 8.00
  • COMFIT COMPOSIT NET Ltd. GORAI, MIRZAPUR, TANGILE COMPETITIVE CHANGES DURING INDUSTRY EVALUATION  •  •  •  •  •  • EMBROYNIC STAGES GROWTH STAGES SHAKEOUT STAGES MATURE STAGES DECLINING STAGE MATURE STAGES : : : : : : 1992 1993 - 1994 1995 - 1996 1997 - 2008 2009 2009 - 2010
  • PRODUCTS OF COMPANY  Thread  Garments  Dying  shirt  Pants  cap
  • EXPORT COUNTRIES  Pakistan,  Srilanka  Thailand
  • TOMISHA FASHION WEAR Ltd. COMPETITIVE CHANGES DURING INDUSTRY EVALUATION      EMBROYNIC STAGES GROWTH STAGES SHAKEOUT STAGES MATURE STAGES DECLINING STAGE : : : : : 1990 1991 - 1993 1994 - 1995 1996 - 2010 ---------------
  • Export Countries 1. China 2. Japan 3. Nepal
  • Conclusion Form this visitation we learnt many things. Specially some of the area I want to mention, As  How to enter a company for visiting.  How to start talking with the manger or others manager.  Learned about the History of the company.  How the company started and which product they used first.  How the company developed day by day.  When they loss, how they overcome.  What are the raw materials using for the production?  How they export the goods & product.  Which are the countries they are exporting?  How percentage tax need to give government.  How much contribution own & form the bank.  Which are products producing? Over all we learnt many things from the visiting. And it will help for the future life in job place. Really it was pleasure to us. We all are leant many things from the project.
  • End of group 1
  • Implications of Industry Evolution: chapter 4  For strategic managers, the most important aspect of industry evolution concerns its impact on Porter’s four competitive forces and through them, on opportunities and threats.  Industry evolution has major implications for two of the five competitive forces- potential competitors and rivalry among established companies and less substantial implications for the competitive forces of buyers, suppliers, and substitutes. We discuss each
  • 1. Potential competitors and industry evolution: The ways in which entry barriers change with industry evolution are summarized in Table 3.2 In an embryonic industry and in the early stages of a growth industry; entry barriers are usually based on the control of technological knowledge. Consequently, at those stages the threat of entry by potential competitors tends to be relatively low. This gives industry incumbents what is commonly known as a first-mover advantage. However, the importance of technological knowledge as a barrier to entry is typically short-lived. Sooner or later potential rivals manage to work out the technological requirements for competing in an industry, and technological barriers to entry decline in importance.
  •  The best thing for a company to do when technological entry barriers are high is to take advantaged of the relative lack of new competition to build up market share and brand loyalty.  For example, in the embryonic stage of the PC industry, Apple computer had a virtual monopoly of the relevant knowledge. This technological advantage allowed Apple to become the market leader. Thus, when technological entry barriers were eroded by imitators such as IBM, Apple had already established a degree of brand loyalty for its products. This enabled Apple to survive in the industry when competitive pressures increased.
  •  Normally, the importance of control over technological knowledge as a barrier to entry declines significantly by the time an industry enters its growth stage.  In addition, because few companies have yet a achieved significant scale economies or differentiated their product sufficiently to guarantee brand loyalty, other barriers to entry tend to be low at this stage. Given the low entry barriers, the threat from potential competitors is normally highest at this point. However, paradoxically, high growth usually means that new entrants can be absorbed into an industry without a marked increase in competitive pressure.
  • Rivalry among established companies and Industry evolution:       The extent and character of rivalry among established companies also change as a industry evolves, presenting a company with new opportunities and threats In an embryonic industry, rivalry normally focuses on perfecting product design and educating consumers. This rivalry can be intense, as in the race to develop superconductors and the company that is the first that is the first to solve design problems often has the opportunity to develop a significant market position. En embryonic industry may also be the creation of one company’s innovative efforts, as happened with personal computers. The company has a major opportunity to capitalize on the lack of rivalry and build up a strong hold on the market. During an industry’s growth stage, rivalry tends to be low.
  •  Rapid growth in demand enables companies to expand their revenues and profits without taking market share away from competitors.  A company has the opportunity to expand its operations.  A strategically aware company takes advantage of the relatively benign environment of the growth stage to prepare itself for the intense competition of the coming industry shakeout.  Shakeout stage, rivalry between companies becomes intense.  Rapid growth during an industry’s growth phase continue to add capacity at rates consistent with past growth.  Managers use historic growth rates.
  • 2. Buyers, suppliers, and industry evolution:   Industry evolution can change the nature of the relationships between an industry and its buyers and supplies. As an industry evolves toward maturity, it becomes both larger and more consolidated. These changes enhance the bargaining power of companies in the industry vis-à-vis suppliers and buyers in a number of ways. First, thee larger a company is, the more important it is to suppliers as a customer for their products and the greater its bargaining power. Second, the more consolidated an industry is, the less suppliers are able to play off companies against each other in an attempt to increase prices. Third, the more consolidated an industry is, the less buyers are able to play off companies against each other in a attempt to drive down prices.
  • 3. Substitute products and industry evolution:  The competitive force of substitute products depends to some extent on the ability of companies in an industry to build brand loyalty for their own products.  Other things being equal, the greater the brand loyalty for an industry’s products. The less likely are consumers to switch to the products of substitute industries. Generally, as an industry evolves toward maturity, companies within it begin to expend more effort on differentiating their products to create brand loyalty.
  •  This gives a company some protection not only from companies in its own industry, but also from those in substitute industries.  This, as it moves toward maturity, an industry begins to develop a grater degree of protection against the competitive force of substitute products. However, the emergence of significant new substitutes may push a mature industry into decline, as synthetic materials have done in the steed industry.
  • 4. Analyzing the macro-environment. Macro-environmental factors are factors external to an industry that influence the level of demand within it, directly affecting company profits. Many of these factors are constantly changing and the change process itself gives rise to new opportunities and threats.  Strategic managers must understand the significance of macro-environment factors and be able to assess the impact of changes in the macro-environment on their company and on the opportunities and threats it faces. Seven elements of the macro-environments are of particular importance here: the macroeconomic environment, the technological environment, the social environment, the demographic environment, the political and legal environment, and the global environment. 
  • The Macro-Economic Environment Ch. 5  The state of the macroeconomic environment determines the general health and well-being of the economy.  This is turn, affects companies ability to earn a adequate rate of return. The four most important macroeconomic indicators in this context are the growth rate of the economy, the interest rates, currency exchange rates, and inflation rates.
  • 1. Economic growth:  The rate of growth in the economy has a direct impact on the level of opportunities and threats that companies face.  Because it leads to an expansion in consumer expenditure, economic growth tends to produce a general easing of competitive pressures within an industry. This gives companies the opportunity to expand their operations. Because economic decline leads to a reduction in consumer expenditure, it increases competitive pressures and constitutes a major threat to profitability. Economic decline frequently causes price wars in mature industries.
  •  Although the precise level of economic growth is notoriously difficult to predict, strategic managers need to be aware of the outlook for the economy.  For example, it would make little sense to embark on an ambitious expansion strategy if most forecasters are expecting a sharp economic downturn. Conversely, if the economy is currently in poor shape but a general upturn in activity is forecasted, companies might be well advised to take up an expansion strategy.
  • 2. Interest rates:  The level of interest rates can determine the level of demand for a company’s products. Interest rates are important whenever consumers routinely borrow money to finance their purchase of these products.  The most obvious example is the housing market, where the mortgage rate directly affects demand, but interest rates also have an impact on the sale of products on autos, appliances, and capital equipment, to give just a few examples. For companies in such industries, rising interest rates are a threat and falling rates an opportunity.  Interest rates also determine the cost of capital for a company. This cost can be a major factor in deciding whether a given strategy is feasible.
  • 3. Currency exchange rates:  Currency exchange rates define the values of the dollar relative to the values of the currencies of other countries.  Movement in currency exchange rates has a direct impact on the competitiveness of a company’s products in the global marketplace. When the value of the dollar is low compared with the value of other currencies, products made in the United States are relatively inexpensive and product made overseas is relatively expensive.
  • 4. Inflation rates:  Inflation can destabilize the economy, producing slower economic growth, higher interest rates, and volatile(unpredictable) currency movements . If inflation keeps increasing, investment planning becomes a hazardous business. The key characteristic of inflation is that it makes the future less predictable.  In an inflationary environment, it that it may be impossible to predict with any accuracy the real value of returns that can be earned from a project five years hence. Such uncertainty makes companies less willing to invest. Their holding back in turn depresses economic activity and ultimately pushes the economy into a slump. Thus high inflation is a threat to companies.
  • 5. The Technological Environment:  Since World War II, the pace of technological change has accelerated. Unleashing a process that has been called a “perennial gale of creativ e destruction.” Technological changes can make established products obsolete overnight.  At the same time it can create a host of new product possibilities. Thus it is both creative and destructive both an opportunity and a threat. Since accelerating technological change also shortens the average product life cycle, organizations need to anticipate the changes that new technologies bring with them: They need to analyze their environment strategically.
  •  Witness recent changes in the electronics industry. For forty years, until the early 1960s, vacuum tubes were a major component in radios and then in record players and early computers.  The advent of transistors destroyed the market for vacuum tubes but at the same time created new opportunities connected with transistors. Transistors up far less space than vacuum tubes, encouraging trend toward miniaturization that continues.
  •  The transistor held its position as the major component in the electronics industry for just decade. In the 1970s microprocessors were developed, and the market for transistors decline rapidly.  At the same time, however, the microprocessor created yet another set of new product opportunities- hand-held calculators, compact disk players, and personal computes to name just few. Strategically aware electronics companies by anticipating the effects of change, benefited from the progression of new technologies. Unaware companies went out of business.
  • New technologies also give rise to new ways of manufacturing established products. 1. The Social Environment 2. The Demographic Environment 3. The Political and Legal Environment 4. The Global Environment
  • 1. The Social Environment  Like technological change, social change creates opportunities and threats. One of the major social movements of the 1970s and 1980s was the trend toward greater health consciousness.  Its impact has been immense, and companies that recognized the opportunities early have often reaped significant gains. Philip Morris, for example, capitalized on the growing health trend when it acquired Miller Brewing Company and then redefined competition in the beer industry with its introduction of low-calorie beer. Similarly, Pepsi Co was able to gain market share from its archrival, Coca-Cola Company, by introducing diet colas and fruit-based soft drinks first.
  •  The health trend has also given rise to booming sales of mineral waters, with a market growth of 15 percent per year during the mid 1980s. In an attempt to capitalize on this opportunity, many of the country’s largest beverage companies are currently expanding into this fragmented industry.  At the same time the health trend has crated a threat for many industries. The tobacco industry, for example, is now in decline as a direct result of greater consumer awareness of the health implications of smoking. Similarly, the sugar industry has seen sales decline as consumers have decided to switch to artificial sweeteners
  • 2. The Demographic Environment   The changing composition of the population is another factor that can create both opportunities and threats. For example, as the baby-boom generation of the 1960s has moved through the population, it has created a host of opportunities and threats. Currently, bay boomers are getting married and creating an upsurge in demand for the consumer appliances normally bought by couples marrying for the first time. Thus companies such as Whirlpool Corporation and General Electric are looking to capitalize on the predicted upsurge in demand fro washing machines, dishwashers, spin dryers, and the kike. The other side of the coin is that industries oriented toward the young, such as the toy industry, have seen their consumer base decline in recent years.
  • 3. The Political and Legal Environment Political and legal factors also have a major effect on the level of opportunities and threats in the environment. One of the most significant trends is recent years has been the move toward deregulation.  By eliminating many legal restrictions, deregulation has opened a number of industries to intense competition. The deregulation of the airline industry in 1979, for example, created the opportunity to establish low-fare carriers –an opportunity that Texas Air, People Express, and others tried to capitalize on. At the same time, the increased intensity of competition created many threats, including, most notably, the threat of prolonged fare wars, which have repeatedly thrown the airline industry into turmoil during the last decade. 
  •  Deregulation apart, companies also face serious legal constraints, which limit their potential strategic options. Antitrust laws, for example, can prevent companies from trying to achieve a dominant market position through acquisitions.  In 1986, both Pepsi Co and Coca-Cola attempted to buy up smaller soft-drink manufacturers, Pepsi bidding for the Seven-Up Company and CocaCola for Dr. Pepper C0. Both acquisitions were forbidden by the Federal Trade Commission on the grounds that if they went through, Pepsi and Coca-Cola between them would control more than 80% of the soft-drink market. Seven-Up subsequently merged with Dr. Pepper, a move that has created the possible threat of the third major company emerging in the industry.
  •  For the future, fears about the destruction of the ozone layer, acid rain, and global warming may be near the top to the political agenda in the 1990s.  Given these concerns, governments seem increasingly likely to enact tough environmental regulations to limit air pollution. Rather than resisting this trend, companies should try to take advantage of it. Fro example, back in 1974, when ozone depletion was still a theory, E.I. Du Pont de Nemours & Company decided to start research into substitutes for ozone-damaging chlorofluorocarbons (CFCs), widely used in aerosols, air conditioners, and refrigeration equipment. At the same time, Du Pont made a pledge to phase out production of CFCS if they were shown to be a threat to public health.
  • 4. The Global Environment  Changes in the global environment can create both opportunities for market expansion and serious threats to a company’s domestic and international market share.  As the world enters the 1990s, developments are occurring that may have great significance for the future of American enterprise. The first is the emergence of the European community as a freetrade blocks containing a single market that is half again as large as the United States. After the removal of trade barriers between Community members in 1992, the European Community could have the fastest growing and potentially most wealthy economy in the industrialized world.
  •  American business would be well advised to take advantage of this growth and to recognize the threat posed by major European companies.  European companies may use their strong domestic economy as a springboard from which to invade(attactk) U. S. markets, much as the Japanese did in the 1970s. American companies need to anticipate these developments rather than ignore them as was all too often the case with the Japanese.
  • A second development is in Eastern Europe, where the collapse of state communism and the rapid shift toward free-market economies by several Eastern European countries has created potentially enormous growth opportunities.  The challenge facing American enterprise is to capitalize on these opportunities before Western European and Asian competitors do. A third development concerns the continuing emergence of “Asian tigers.” In particular, Thailand looks set to join a list of major Asian competitors that already includes Japan, South Korea, and Taiwan. As a group, these countries will pose a significant competitive threat for the foreseeable future. At the same time, their markets represent largely untapped growth opportunity.
  • Financial Resources chapter 6 A company’s financial position can constitute either a strength or a weakness. It can seriously affect the company’s ability to build distinctive competencies in other areas, given that doing so often requires substantial investments. These are: 1. Cash Flow 2. Credit Position 3. Liquidity
  • 1. Cash Flow  Cash flow- perhaps the most important financial consideration for a company  It refers to the surplus of internally generated funds over expenditure.  A positive cash flow enables a company to fund new investments without borrowing money from bankers or investors.  This ability is obviously a strength, since the company avoids paying interest or dividends.  If current positions cannot generate a positive cash flow, the company is in a relatively weak financial position.
  • 2. Credit Position    (1) (2) Even if cash flow is a weakness, a company can still establish a reasonable secure overall financial standing if it has a good credit position. A good credit position can enable a company to expand by using borrowed money. To establish good, a company must Have a low level of current debt or Be viewed by bankers and investors as having good prospects. Many bio-technological companies, for example, have a negative cash flow but a strong over financial position.
  • Liquidation A company is said to be Liquid when its current assets exceed its current liabilities.  Liquidity takes the form of idle working capital, such as marketable securities, or funding in reserve, such as unused lines of credit.  A company’s liquidity is a measure of its ability to meet unexpected contingencies-for instance, a sudden dip in demand or a price war.  Companies that lack liquidity are in a weak financial position because they may be unable to meet these contingencies.
  • The role of financial analysis in case study analysis
  • Profit Ratios Gross profit margin The gross profit margin gives an indication of the total margin available to cover operating expenses and yield a profit. It is a measure of the value a company creates net of the cost of performing value creation activities. It defined as follows: 1.
  • Sales Revenue – Cost of Goods Sold Gross Profit Margin= Sales Revenue
  • 2. Return on total assets. This measure the return earned on the total investment in a company. It defined as follows:
  • Profits After Tax+ Interest Return of Total Assets= Total Assets
  • 3. Return on stockholder’s equity Often referred to as return on net worth, this measures the rate of return on stockholder’s investment in the company.
  • Profit After Tax and Interest Return on Stockholder’s Equity= Total Stockholder’s Equity
  • Liquidity Ratios Current ratio The current ratio measures the extent to which the claims of short-term creditors are covered by assets that can be quickly converted into cash. 1.
  • Current Assets Current Ratio= Current Liability
  • 2. Quick Ratio The quick ratio measures a company’s ability to pay off the claims of short-term creditors without relying on the sale of its inventories. This is a valuable measure since in practice the sale of inventories is often difficult. It is defined as follows:
  • Current Assets - Inventories Quick Ratio = Current Liabilities
  • Leverage Ratios A company is said to be highly leveraged when it relies on external sources of funds rather than internally generated funds to finance its investment.
  • 1. Debt-to-Assets The debt-to-asset ratio is the most direct measure of the extent to which borrowed funds have been used to finance a company’s investments. It is defined as follows:
  • Total Debt Debt-to-Assets = Total Assets
  • 2. Long-term debt-to-equity ratio The long-term debt-to-equity measure indicates the balance between debt and equity in a company’s long-term capital structure. This is perhaps the most widely used measure of a company’s leverage. It is defined as follows:
  • Long-term Debt Debt-to-Equity = Total Stockholder’s Equity
  • 3. Times-covered ratio The times-covered ratio measures the extent to which a company’s gross profit covers its annual interest payments. If the rimes-covered ratio declines to less than 1, then the company is unable to meet its interest costs and is technically insolvent. The ratio is defined as follows:
  • Profits Before Interest and Tax Times-covered Ratio = Total Interest Charges
  • Product Differentiation Strategy chapter 7 1. 2. 3. 4. Market Penetration Product Development Market Development Product Proliferation
  •  Companies with major investments in fixed assets, such as steel mills or auto plants, tend to be less liquid than companies with a lower level of fixed assets.  The reason is that fixed assets cannot be easily translated into cash and often require major fixed costs, which place heavy demands on the company’s cash reserves in times of trouble.
  • 1. Market Penetration When a company concentrates on expanding market share in its existing product markets, it is engaging in a strategy of Market Penetration. Market penetration involves using advertising to promote and build product differentiation. In some industry, advertising is used to influence consumer’s brand choice and create a brandname reputation for the company and its products.
  • In some mature industries- for examples, the soap and detergent, disposable diapers.
  • 2. Product Development Product development is the creation of new or improved products to replace existing ones. Product development is important for maintaining product differentiation and building market share. Ex. The laundry detergent Tide has gone through over fifty different changes in formulation over the past forty years to improve its performance.
  • 3. Market Development Market development involves finding new market segments in which to exploit a company’s products. A company pursuing this strategy wishes to capitalize on the brand name it has developed in one market segment by finding new market segments in which to compete.
  • Ex. The Toyota Corolla was aimed at the small economy car segment of the market as was the Honda Accord. However, over time, the Japanese upgraded each car, and now each is directed at more expensive market segments. The Accord is now a leading contender in the mid-size luxury sedan segment, and the Corolla fils the small-car segment that used to be occupied by the Celica, which is now aimed at a sportier market segment.
  • 4. Product Proliferation (Production) Companies seldom produce just one product. Most commonly, companies produce a range of products aimed at different market segments so that they have broad product lines. The strategy of pursuing a broad product line to deter entry is known as Product Proliferation.
  • Assignment Find out different companies which has develop so much in the market.
  • Corporate-Level strategy chapter 8 The choice of Entry Mode There are basically five different ways of entering an overseas market: 1. Exporting 2. Licensing 3. Franchising 4. Joint venture 5. Wholly owned subsidiary 
  • 1. Exporting Most manufacturing companies begin their global expansion as exporters and only later switch to one of the other modes for serving a foreign market. Exporting does have two distinct advantages. 1. Exporting avoid the costs of having to establish manufacturing operations in the host country. Since these costs are often substantial, this is not a trivial advantage.
  • 2. Exporting is consistent with a pure global strategy. By manufacturing the product in a centralized location and then exporting it to other national markets, a company may be able to realize substantial scale economies from its global sales volume. This is how Sony came to dominate the global television market and how many of the Japanese auto companies originally made inroads into the U. S. auto market.
  • 2. Licensing International licensing is an arrangement whereby a foreign licensee buys the rights to manufacture a company’s product in the licensee’s country for a negotiated fee. The advantage of licensing is that a company does not have to bear the development costs and risks associated with opening up a foreign market. This can make licensing a very attractive option for companies that lack the capital to develop operations overseas.
  • Two serious drawbacks to licensing. 1. Licensing does not give the tight control over manufacturing, marketing, and strategic functions in foreign countries that is required if a company is going to pursue a global strategy. Each licensee sets up its own manufacturing operations. Licensing, by its very nature, severely limits the ability of a company to do this. A licensee will not let a multinational company take its profits and use them to support an entirely different licensee operating in another country.
  • 2. A second problem with licensing arises when a company licenses its technological know-how to foreign companies. Technological know-how constitutes the basis of the competitive advantage of many multination companies. By licensing its technology, a company can quickly lose control over it. Many companies have made the mistake of thinking that they could maintain control over their know-how within the framework of a licensing agreement. Unfortunately, this has often proved not to be the case.
  • 3. Franchising In many respects franchising is similar to licensing. However, whereas licensing is a strategy pursued primarily by manufacturing companies, franchising is a strategy employed primarily by service companies. Both McDonald’s and Hilton International, for example, have expanded overseas by franchising.
  • In the case of franchising, a company sells limited rights to use its brand name to franchisee in return for a lump-sum payment and a share of the franchisee’s profits. The Advantages are: 1. It does not bear the development costs and risks associated with opening up a foreign market on its own. 2. Franchisee assumes those costs and risks. 3. Service company can build up a global presence quickly and at a low cost.
  • Disadvantages are: 1. A franchiser does not have to consider the need to coordinate manufacturing in order to achieve economies of scale. 2. Nevertheless, franchising may inhibit the ability of a company to achieve global strategic coordination. 3. Less quality control.
  • 4. Joint venture Establishing a joint venture with a foreign company has long been a popular way to enter a new market. Advantages are: 1. A multinational may feel that it can benefit from a local partner’s knowledge of a host country’s competitive condition, culture, language, political systems, and business systems. 2. When the development costs and risks of opening up a foreign market are high, a company might gain by sharing these costs and risks with a local partner.
  • 3. In many countries political considerations make joint ventures the only feasible entry mode. Disadvantages are: 1. A company that enters into a joint venture runs the risk of losing control over its technology to its venture partner. 2. A joint venture does not give a company the right control over different subsidiaries that it might need if it wishes to pursue a global strategy.
  • 5. Wholly owned subsidiary Establishing a wholly owned subsidiary is generally the most costly method of serving a foreign market. Companies doing this have to bear the full costs and risks associated with setting up overseas operations. Advantages are: 1. It reduces the risk of losing control over competencies. 2. It gives a tight control over operations in different countries that is necessary if a company is going to pursue a global strategy.
  • Foreign Market Entry Modes The decision of how to enter a foreign market can have a significant impact on the results. Expansion into foreign markets can be achieved via the following four mechanisms:
  • Foreign Entry Modes are: 1. Exporting 2. Licensing 3. Joint Venture 4. Direct Investment
  • Exporting  Exporting is the marketing and direct sale of domestically-produced goods in another country. Exporting is a traditional and well-established method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.  Exporting commonly requires coordination among four players:  Exporter  Importer  Transport provider  Government
  • Licensing  Licensing  Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance.  Because little investment on the part of the licensor is required, licensing has the potential to provide a very large ROI. However, because the licensee produces and markets the product, potential returns from manufacturing and marketing activities may be lost.
  • Joint Venture There are five common objectives in a joint venture: market entry, risk/reward sharing, technology sharing and joint product development, and conforming to government regulations. Other benefits include political connections and distribution channel access that may depend on relationships.  Such alliances often are favorable when:  the partners' strategic goals converge while their competitive goals diverge;  the partners' size, market power, and resources are small compared to the industry leaders; and  partners' are able to learn from one another while limiting access to their own proprietary skills.
  •  The key issues to consider in a joint venture are ownership, control, length of agreement, pricing, technology transfer, local firm capabilities and resources, and government intentions.  Potential problems include:  conflict over asymmetric new investments  mistrust over proprietary knowledge  performance ambiguity - how to split the pie  lack of parent firm support  cultural clashes  if, how, and when to terminate the relationship
  •  Joint ventures have conflicting pressures to cooperate and compete:  Strategic imperative: the partners want to maximize the advantage gained for the joint venture, but they also want to maximize their own competitive position.  The joint venture attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resources.  The joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control.
  • Foreign Direct Investment  Foreign direct investment (FDI) is the direct ownership of facilities in the target country. It involves the transfer of resources including capital, technology, and personnel. Direct foreign investment may be made through the acquisition of an existing entity or the establishment of a new enterprise.  Direct ownership provides a high degree of control in the operations and the ability to better know the consumers and competitive environment. However, it requires a high level of resources and a high degree of commitment.
  • Different modes of entry may be more appropriate under different circumstances, and the mode of entry is an important factor in the success of the project. Walt Disney Co. faced the challenge of building a theme park in Europe. Disney's mode of entry in Japan had been licensing. However, the firm chose direct investment in its European theme park, owning 49% with the remaining 51% held publicly. Besides the mode of entry, another important element in Disney's decision was exactly where in Europe to locate. There are many factors in the site selection decision, and a company carefully must define and evaluate the criteria for choosing a location. The problems with the Euro Disney project illustrate that even if a company has been successful in the past, as Disney had been with its California, Florida, and Tokyo theme parks, future success is not guaranteed, especially when moving into a different country and culture. The appropriate adjustments for national differences always should be made.
  • The Case of Euro Disney   Different modes of entry may be more appropriate under different circumstances, and the mode of entry is an important factor in the success of the project. Walt Disney Co. faced the challenge of building a theme park in Europe. Disney's mode of entry in Japan had been licensing. However, the firm chose direct investment in its European theme park, owning 49% with the remaining 51% held publicly. Besides the mode of entry, another important element in Disney's decision was exactly where in Europe to locate. There are many factors in the site selection decision, and a company carefully must define and evaluate the criteria for choosing a location. The problems with the Euro Disney project illustrate that even if a company has been successful in the past, as Disney had been with its California, Florida, and Tokyo theme parks, future success is not guaranteed, especially when moving into a different country and culture. The appropriate adjustments for national differences always should be made.
  • Requirements 1. 2. 3. 4. 5. 6. 7. 8. 9. Main ideas of this case What are the different companies are there? What are the different decision that different companies would like to take? How each company can be successful? What are the different entry mode can be used to enter into overseas market? SWOT analyze the different company situation Are there any strategy is involved in market? Best solution to be made Conclusion
  • The following exchanges were overhead in an office:
  • Boss: I asked for this report on Friday - what delayed you? Subordinate: I was trying to clear up the end of quarter returns. Boss: But it's already the fourth of the month. Subordinate: Yes, but I had two clerks away on holiday at the same time. Boss: How did that happen? Subordinate: Well they asked me separately - a few weeks apart - and I hadn't realized what the consequences would be. Boss: I'm afraid it is not good enough. I constantly have to complain about work which is produced at the last moment -or later. It is often badly prepared and faulty. What are you going to do about it? Subordinate: I don't know. I never have the time to think ahead.
  • 6 Steps to Successful Case Studies
  • 1. Make sure you have a story to tell  Once someone nominates a customer for a case study, find out whether or not there’s a story worth sharing. The fact is that not all customer situations translate into an interesting story (or one that will nudge prospects along in the sales cycle). One suggestion is to create a backgrounder form to be filled out by anyone suggesting a case study candidate.
  • 2. Determine the value of the story While it never hurts to publish lots of case studies, you want to focus your efforts on the ones that will serve you best. Once you understand the basic customer situation, compare it to your existing library of case studies. Some considerations include the following:  Will this story complement the list or will it be largely redundant?  Will it help round out examples of customers in a certain industry?  Is the customer a brand name that we want to tout?  Is the customer engaged in a market that our company is trying to penetrate?  Will the story highlight a solution or service that needs more visibility?  Are the proof points different from those in other stories?
  • 3. Get the customer’s buy-in  If the story looks promising, make sure the customer is not only willing to be interviewed and to share ROI metrics, but that he or she has the green light to participate in a case study. It’s wonderful to have an enthusiastic advocate within the customer’s organization. But if the customer’s marketing or legal department is not open to going public with details, there’s no sense pursuing the story.
  • 4. Prepare the customer  There’s a lot to be said for the element of spontaneity in an interview. After all, the most engaging stories are based on first-hand interviews and include plenty of customer quotes to move the story along. However, there’s nothing more frustrating than starting an interview only to find out that the customer can’t answer the questions.  To avoid this roadblock, send the customer a general set of questions ahead of time, perhaps as you’re scheduling the interview time. This allows the customer to decide if he or she is the appropriate interviewee, and to make sure all information (such as ROI metrics) is in hand during the interview.
  • 5. Nail the interview  The interview can make or break a case study. After all, if you don’t get enough information – and compelling details – your story will fall flat. The following tips will help you get the most out of an interview:  Do a bit of research before interviewing the customer. Recent customer press releases, news coverage, or annual report details might inspire questions that help draw out a unique angle. (Using this technique, a provider of ondemand Internet services has been able to uncover its customers’ online revenue percentages, conversion rates, and page views).
  •  Tailor the interview questions for the call. Not every question will apply to each customer situation so don’t waste everyone’s time asking irrelevant questions.  Ask open-ended questions. Getting lots of “yes” and “no” answers makes it hard to tell a good story.  Leave room to veer from the script. Some of the most interesting questions are prompted by the customer’s responses to your original questions.
  • 6. Set expectations  If you can give the customer a general idea of when you’ll be sending the case study draft – and also get their commitment to a fast review and approval – the entire process should go quickly and smoothly. Make sure to tell the customer of anything else you will need, such as a boilerplate company description and logo file. One of my clients has employed this technique to greatly reduce the time it takes to produce a case study and, in a few instances, has completed them in a matter of days.
  • What Students Gain From Cases  Experience issues and problems confronting business managers  Analyze the issues and problems in the light of business theory and research learned in other classes  Learn research procedures  Develop appropriate strategies and plans for coping with problems  Develop persuasive and analytical skills  Gain new ideas and insights from group discussions and peer edits
  • Case Study Procedures  Identify the players in the case: their common and individual goals  Identify key issues  Background leading up to the problem  Business objectives  Company’s cultural/political environment  Problems in case  Determine how the issues influenced and/or caused problems  Recommend realistic and workable strategies to solve problems  Provide evidence/facts with advantages and disadvantages of at least two solutions  Prepare succinct and convincing results
  • Seven Easy Steps to Case Analysis        State the problem concisely Point out key issues; how did they influence the problems Determine management’s objectives in this case Understand the company’s goals regarding this case Analyze the facts of the case as they contributed to the problem Consider and write the advantages and disadvantages of each alternative Choose a solution, based on the evidence
  • Comparison of Market Entry Options  The following table provides a summary of the possible modes of foreign market entry:
  • Mode Conditions Favoring this Mode Advantages Disadvantages Exporting Limited sales potential in target country; little product adaptation required Distribution channels close to plants High target country production costs Liberal import policies High political risk Minimizes risk and investment. Speed of entry Maximizes scale; uses existing facilities. Trade barriers & tariffs add to costs. Transport costs Limits access to local information Company viewed as an outsider Licensing Import and investment barriers Legal protection possible in target environment. Low sales potential in target country. Large cultural distance Licensee lacks ability to become a competitor. Minimizes risk and investment. Speed of entry Able to circumvent trade barriers High ROI Lack of control over use of assets. Licensee may become competitor. Knowledge spillovers License period is limited Joint Ventures Import barriers Large cultural distance Assets cannot be fairly priced High sales potential Some political risk Government restrictions on foreign ownership Local company can provide skills, resources, distribution network, brand name, etc. Overcomes ownership restrictions and cultural distance Combines resources of 2 companies. Potential for learning Viewed as insider Less investment required Difficult to manage Dilution of control Greater risk than exporting a & licensing Knowledge spillovers Partner may become a competitor. Import barriers Small cultural distance Assets cannot be fairly priced High sales potential Low political risk Greater knowledge of local market Can better apply specialized skills Minimizes knowledge spillover Can be viewed as an insider Higher risk than other modes Requires more resources and commitment May be difficult to manage the local resources. Direct Investment
  • Advantages and disadvantage of different Entry Modes
  • ENTRY MODE ADVANTAGES DISADVANTAGES Exporting Ability to realize global scale economies High transport costs Tariff barriers Problems with local marketing agents. Licensing Low development costs and Difficulties achieving global strategic coordination risks Franchising Low development costs and Difficulties achieving global strategic coordination risks Problems of quality control Joint ventures Access to local partner’s knowledge Sharing of development costs and risks Difficulties achieving global strategic coordination Lack of control over technology Political acceptability Wholly owned subsidiaries Protection of technology Establishment of tight control necessary for achieving global strategic coordination Assumption by company of all development costs and risk
  • The Boston Consulting Group Business Matrix chapter 9  1. 2. 3. The main objective of the Boston Consulting Group (BCG) technique is to help strategic managers identify the cash-flow requirements of the different businesses in their portfolio. The BCG approach involves three main steps: Dividing a company into strategic business units Comparing SBUs against each other by means of a matrix that indicates the relative prospects of each. Developing strategic objectives with respect to each SBU
  •  The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's.  It is based on the observation that a company's business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the name "growth-share".  Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growthshare matrix thus maps the business unit positions within these two important determinants of profitability.
  • BCG Matrix
  • STARS 1. The leading SBUs in a company’s portfolio are the stars. They have a high relative market share and are based in high-growth industries. In the language of SWOT analysis, they have both competitive strengths and opportunities for expansion. 2. Thus they offer excellent long-term profit and growth opportunities. 3. Generally, BCG predicts that established stars are likely to be highly profitable and therefore can generate sufficient cash for their own investment needs. 4. Emerging stars, in contrast, may require substantial cash injections to enable them to consolidate their market lead.
  • QUESTION MARKS 1. SBUs that are relatively weak in competitive terms, that have low relative market shares, are question marks. 2. However, they are based in high-growth industries and thus may offer opportunities for long-term profit and growth. 3. A question mark requires substantial net injections of cash; it is cash hungry. 4. The corporate head office has to decide whether a particular question mark has the potential to become a star and is therefore worth the capital investment necessary to achieve stardom
  • CASH COWS  SBUs that have a high market share in low-growth industries and a strong competitive position in mature industries are cash cows.  Their competitive strength comes from being farthest down the experience curve. They are the cost leaders in their industries.  BCG argues that this position enables such SBUs to remain very profitable.  However, low growth implies a lack of opportunities for future expansion.  As a consequence, BCG argues that the capital investment requirements of cash cows are not substantial, and thus they are depicted as generating a strong positive cash flow.
  • DOGS  SBUs that are in low-growth industries but have a low market share are dogs.  They have a weak competitive position in unattractive industries and thus are viewed as offering few benefits to a company  BCG suggests that such SBUs are unlikely to generate much in the way of a positive cash flow and indeed may become cash hogs.  Though offering few prospects for future growth in returns, dogs may require substantial capital investments just to maintain their low market share.
  • BCG STARS (high growth, high market share) - Stars are defined by having high market share in a growing market. - Stars are the leaders in the business but still need a lot of support for promotion a placement. - If market share is kept, Stars are likely to grow into cash cows.
  • BCG QUESTION MARKS (high growth, low market share) - These products are in growing markets but have low market share. - Question marks are essentially new products where buyers have yet to discover them. - The marketing strategy is to get markets to adopt these products. - Question marks have high demands and low returns due to low market share. - These products need to increase their market share quickly or they become dogs. - The best way to handle Question marks is to either invest heavily in them to gain market share or to sell them.
  • BCG CASH COWS (low growth, high market share) - Cash cows are in a position of high market share in a mature market. - If competitive advantage has been achieved, cash cows have high profit margins and generate a lot of cash flow. - Because of the low growth, promotion and placement investments are low. - Investments into supporting infrastructure can improve efficiency and increase cash flow more. - Cash cows are the products that businesses strive for.
  • BCG DOGS (low growth, low market share) - Dogs are in low growth markets and have low market share. - Dogs should be avoided and minimized. - Expensive turn-around plans usually do not help.
  • Are there any problems with the BCG matrix model? 1. The first problem can be how we define market and how we get data about market share 2. A high market share does not necessarily lead to profitability at all times 3. The model employs only two dimensions – market share and product or service growth rate 4. Low share or niche businesses can be profitable too (some Dogs can be more profitable than cash Cows)
  • 5. The model does not reflect growth rates of the overall market 6. The model neglects the effects of synergy between business units 7. Market growth is not the only indicator for attractiveness of a market
  • When should I use the BCG matrix model? 1. Each product has its product life cycle, and each stage in product's life-cycle represents a different profile of risk and return. In general, a company should maintain a balanced portfolio of products. Having a balanced product portfolio includes both high-growth products as well as low-growth products. 2. A high-growth product is for example a new one that we are trying to get to some market. It takes some effort and resources to market it, to build distribution channels, and to build sales infrastructure, but it is a product that is expected to bring the gold in the future. An example of this product would be an iPod.
  • 3. A low-growth product is for example an established product known by the market. Characteristics of this product do not change much, customers know what they are getting, and the price does not change much either. This product has only limited budget for marketing. The is the milking cow that brings in the constant flow of cash. An example of this product would be a regular Colgate toothpaste.
  • 4. But the question is, how do we exactly find out what phase our product is in, and how do we classify what we sell? Furthermore, we also ask, where does each of our products fit into our product mix? Should we promote one product more than the other one? The BCG matrix can help with this. 5. The BCG matrix reaches further behind product mix. Knowing what we are selling helps managers to make decisions about what priorities to assign to not only products but also company departments and business units.
  • Strategy - portfolio analysis - GE matrix  The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities.
  • The company must:  (1) Analyze its current business portfolio and decide which businesses should receive more or less investment, and  (2) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained.
  •  The two best-known portfolio planning methods are the Boston Consulting Group Portfolio Matrix and the McKinsey / General Electric Matrix. In both methods, the first step is to identify the various Strategic Business Units ("SBU's") in a company portfolio.  An SBU is a unit of the company that has a separate mission and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or even individual brands - it all depends on how the company is organized.
  • The McKinsey / General Electric Matrix  The McKinsey/GE Matrix overcomes a number of the disadvantages of the BCG Box. Firstly, market attractiveness replaces market growth as the dimension of industry attractiveness, and includes a broader range of factors other than just the market growth rate. Secondly, competitive strength replaces market share as the dimension by which the competitive position of each SBU is assessed.  The diagram below illustrates some of the possible elements that determine market attractiveness and competitive strength by applying the McKinsey/GE Matrix to the UK retailing market:
  • Analyzing a Case Study chapter 10 1. 2. 3. 4. 5. 6. 7. 8. The history, development and growth of the company over time. The identification of the company’s internal strengths and weaknesses. The nature of the external environment surrounding the company. A SWOT analysis. The kind of corporate-level strategy pursued by a company. The nature of the company’s business-level strategy. The company’s structure and control systems and how they match its strategy. Recommendations.
  • A SWOT checklist Potential Internal Strengths Many products lines? Broad market coverage? Manufacturing competence? Good marketing skills? R & D skills and leadership? Brand name reputation? Portfolio management skills? Good financial management? Cost or differentiation advantage? Ability to manage strategic change? Appropriate management style? Others? Potential Internal Weaknesses Rising, narrow product lines? Decline in R&D innovations? Loss of customer good will? Loss of brand name capital? Inadequate information systems? Growth without direction? Loss of corporate direction? High conflict and politics? Poor financial management? Poor marketing plan? Bad portfolio management? Others?
  • Potential environmental opportunities Potential environmental threats 1. 8. Expand core business? Widen product range? Diversify into new growth busi.? Expand into foreign markets? Apply R&D skills in new areas? Vertically integrated forward? Enlarge corporate portfolio? Overcome barriers to entry? 9. Reduce rivalry among competition? 7. 10. Make profitable new acquisition? Seek fast market growth? Apply brand name capital in new areas? Others? 8. 1. 2. 3. 4. 5. 6. 7. 11. 12. 13. 2. 3. 4. 5. 6. 9. 10. 11. 12. 13. Attacks on core business? Increases in domestic competition? Change in consumer tastes? Fall in barriers to entry? Rise in new or substitute products? Increase in industry rivalry? Potential for takeover? Existence of corporate raiders? Increase in regional competition? Changes in economic factors? Downturn in economy? Rising labor costs? Slower market growth?
  • Business Strategy Tree chapter 11
  • Business Strategy
  • Corporate Culture
  • Corporate Culture 1. The beliefs and values shared by people who work in an organisation  How people behave with each other  How people behave with customers/clients  How people view their relationship with stakeholders  People’s responses to energy use, community involvement, absence, work ethic, etc.  How the organisation behaves to its employees – training, professional development, etc.
  • Corporate Culture 2. May be driven by: 3. Vision – where the organisation wants to go in the future 4. Mission Statement – summary of the beliefs of the organisation and where it is now
  • Corporate Culture 5. May be reflected in: Attitude and behaviour of the leadership Attitude to the role of individuals in the workplace – open plan offices, team based working, etc. Logo of the organisation The image it presents to the outside world Its attitude to change
  • Corporate Culture What corporate culture do you think the following businesses have managed to develop? Virgin Group Nike McDonalds The Body Shop Copyright: Joshua2150, Copyright: fadaquiqa, alexbol alexallied http://www.sxc.hu http://www/sxc.hu http://www.sxc.hu
  • Strategic Planning
  • Strategic Planning  First Stage of Strategic Planning may involve:  Futures Thinking  Thinking about what the business might need to do 10–20 years ahead  Strategic Intents  Thinking about key strategic themes that will inform decision making  “The thicker the planning document, the more useless it will be”  (Brent Davies: 1999) Taking time to think and reflect may be more important than many businesses allow time for! Copyright: Intuitive, http://www.sxc.hu
  • Strategic Planning  The Vision  Communicating to all staff where the organisation is going and where it intends to be in the future  Allows the firm to set goals  Aims and Objectives:  Aims – long term target  Objectives – the way in which you are going to achieve the aim
  • Strategic Planning  Example:  Aim may be for a chocolate manufacturer to break into a new overseas market  Objectives:  Develop relationships with overseas suppliers  Identify network of retail outlets  Conduct market research to identify consumer needs  Find location for overseas sales team HQ
  • Strategic Planning  Once the direction is identified:  Analyse position  Develop and introduce strategy  Evaluate:  Evaluation is constant and the results of the evaluation feed back into the vision
  • Analysis
  • SWOT  Strengths – identifying existing organisational strengths  Weaknesses – identifying existing organisational weaknesses  Opportunities – what market opportunities might there be for the organisation to exploit?  Threats – where might the threats to the future success come from?
  • PEST  Political: local, national and international political developments – how will they affect the organisation and in what way/s?  Economic: what are the main economic issues – both nationally and internationally – that might affect the organisation?  Social: what are the developing social trends that may impact on how the organisation operates and what will they mean for future planning?  Technological: changing technology can impact on competitive advantage very quickly!
  • PEST  Examples:        Growth of China and India as manufacturing centres Concern over treatment of workers and the environment in less developed countries who may be suppliers The future direction of the interest rate, consumer spending, etc. The changing age structure of the population The popularity of ‘fads’ like the Atkins Diet The move towards greater political regulation of business The effect of more bureaucracy in the labour market
  • Five-Forces  Developed by Michael Porter: forces that shape and influence the industry or market the organisation operates in.  Strength of Barriers to Entry - how easy is it for new rivals to enter the industry?  Extent of rivalry between firms – how competitive is the existing market?  Supplier power – the greater the power, the less control the organisation has on the supply of its inputs.  Buyer power – how much power do customers in the industry have?  Threat from substitutes – what alternative products and services are there and what is the extent of the threat they pose?
  • Required Inputs  Changing strategy will impact on the resources needed to carry out the strategy:  Specifically the impact on:  Land – opportunities for acquiring land for development – green belt, brownfield sites, planning regulations, etc.  Labour – ease of obtaining the skilled and unskilled labour required  Capital – the type of capital and the cost of the capital needed to fulfil the strategy
  • Evaluation
  • Evaluation  Data from sales, profit, etc. used to evaluate the progress and success of the strategy and to inform of changes to the strategy in the light of that data Information from a wide variety of sources can help to measure and inform the impact and direction of the strategy. Copyright: Mad7986, http://www.sxc.hu
  • Types of Strategy
  • Types of Strategy  Competitive Advantage – something which gives the organisation some advantage over its rivals  Cost advantage – A strategy to seek out and secure a cost advantage of some kind - lower average costs, lower labour costs, etc.
  • Types of Strategy Market Dominance:  Achieved through:  Internal growth  Acquisitions – mergers and takeovers New product development: to keep ahead of rivals and set the pace Contraction/Expansion – focus on what you are good at (core competencies) or seek to expand into a range of markets?
  • Types of Strategy  Price Leadership – through dominating the industry – others follow your price lead  Global – seeking to expand global operations  Reengineering – thinking outside the box – looking at news ways of doing things to leverage the organisation’s performance
  • Types of Strategy  Internal business level strategies –  Downsizing – selling off unwanted parts of the business – similar to contraction  Delayering – flattening the management structure, removing bureaucracy, speed up decision making  Restructuring – complete re-think of the way the business is organised
  • SWOT Analysis chapter 12  Strategy - SWOT analysis  Definition:  SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats
  •  SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment.  Once key strategic issues have been identified, they feed into business objectives, particularly marketing objectives. SWOT analysis can be used in conjunction with other tools for audit and analysis, such as PEST analysis and Porter's Five-Force analysis. It is also a very popular tool with business and marketing students because it is quick and easy to learn.
  • The Key Distinction - Internal and External Issues  Strengths and weaknesses are internal factors. For example, strength could be your specialist marketing expertise. A weakness could be the lack of a new product.
  •  Opportunities and threats are external factors. For example, an opportunity could be a developing distribution channel such as the Internet, or changing consumer lifestyles that potentially increase demand for a company's products. A threat could be a new competitor in an important existing market or a technological change that makes existing products potentially obsolete.
  •  Areas to Consider  Some of the key areas to consider when identifying and evaluating Strengths, Weaknesses, Opportunities and Threats are listed in the example SWOT analysis below:
  • Chapter 13 Selecting and Managing Entry Modes Prentice Hall 2003 281
  • Chapter Preview • Discuss the essential aspects of exporting • Define each form of counter trade • Explain each type of export/import financing • Describe the advantages and disadvantages of each contractual entry mode • Identify the pluses and minuses of each investment entry mode • Identify strategic factors in selecting entry modes
  • Developing an Export Strategy Step 1 Step 2 Step 3 Step 4 Identify a potential market Match needs to abilities Initiate meetings Commit resources
  • Degree of Export Involvement Direct exporting Indirect exporting (sell to buyers) (sell to intermediaries) •• Sales representatives Sales representatives •• Distributors Distributors ••Agents Agents ••Export management companies Export management companies ••Export trading companies Export trading companies
  • Avoiding Export Blunders Conduct market research Obtain export advice Consider a freight forwarder
  • Forms of Counter trade Barter Direct exchange without money Counter purchase Sale to a country in return for promise of future purchase from it Offset agreement Offset a hard-currency sale to a nation with future hard-currency purchase Switch trading Sale by a company of an obligation to purchase from a country Buyback Export of industrial equipment in return for products the equipment produces
  • Export/Import Financing
  • High-Risk Approaches Advance payment Open account Importer pays exporter for merchandise before it ships Exporter ships merchandise and later bills importer
  • Documentary Collection Bank acts as intermediary without accepting financial risk Draft (bill of exchange) Document that orders an importer to pay an exporter a specified sum of money at a specified time Bill of lading Contract between an exporter and shipper specifying destination and shipping costs for merchandise
  • Documentary Collection Process
  • Letter of Credit Importer’s bank issues a document stating that the bank will pay the exporter when exporter fulfills document’s terms  Irrevocable  Revocable  Confirmed
  • Letter of Credit Process
  • Licensing Company owning intangible property (licensor) grants another firm (licensee) the right to use it for a specified time Advantages + + + + Finance expansion Reduce risk Reduce counterfeits Upgrade technologies Disadvantages – – – Restrict licensor’s future Reduce global consistency Lend strategic property
  • Franchising Company (franchiser) supplies another (franchisee) with intangible property over an extended period Advantages Disadvantages + + + Low cost and low risk Rapid expansion Local knowledge – Cumbersome – Lost flexibility
  • Management Contract Company supplies another with managerial expertise for a specific period of time Advantages + Few assets risked + Nations finance projects + Develops local workforce Disadvantages – – Personnel at risk Create competitor
  • Turnkey Project Company designs, constructs, and tests a production facility for a client + Firms specialize in core Advantages Disadvantages competency + Nations obtain infrastructure projects – Politicized process – Create competitor
  • Wholly Owned Subsidiary Facility entirely owned and controlled by a single parent company Advantages + + Day-to-day control Coordinate subsidiaries Disadvantages – Expensive – High risk
  • Joint Venture Separate company created and jointly owned by two or more independent entities to achieve a common business objective Forward • Backward • Buyback • Multistage Advantages • Reduce risk level • Penetrate markets • Access channels • Protect interests Disadvantages • • Partner conflict Lose control
  • Strategic Alliance Entities cooperate (but do not form a separate company) to achieve strategic goals of each Advantages Share project cost Tap competitors’ strengths Gain channel access Protect interests Disadvantages Create competitor Partner conflict
  • Entry Modes: Strategic Factors Cultural environment Political/Legal environments Market size Production and shipping costs International experience
  • Risk, Control, Experience
  • Chapter Review • Discuss the essential aspects of exporting • Define each form of counter trade • Explain each type of export/import financing • Describe the advantages and disadvantages of each contractual entry mode • Identify the pluses and minuses of each investment entry mode • Identify strategic factors in selecting entry modes
  • Kaizen Chapt. 14  Kaizen (Japanese for "improvement") is a Japanese philosophy that focuses on continuous improvement throughout all aspects of life.  When applied to the workplace, Kaizen activities continually improve all functions of a business, from manufacturing to management and from the CEO to the assembly line workers. By improving standardized activities and processes, Kaizen aims to eliminate waste.  Kaizen was first implemented in several Japanese businesses during the country's recovery after World War II and has since spread to businesses throughout the world.
  • Introduction  Kaizen is a daily activity, the purpose of which goes beyond simple productivity improvement.  It is also a process that, when done correctly, humanizes the workplace, eliminates overly hard work ("muri"), and teaches people how to perform experiments on their work using the scientific method and how to learn to spot and eliminate waste in business processes.  The philosophy can be defined as bringing back the thought process into the automated production environment dominated by repetitive tasks that traditionally required little mental participation from the employees.
  •  People at all levels of an organization can participate in kaizen, from the CEO down, as well as external stakeholders when applicable.  The format for kaizen can be individual, suggestion system, small group, or large group. At Toyota, it is usually a local improvement within a workstation or local area and involves a small group in improving their own work environment and productivity.  This group is often guided through the kaizen process by a line supervisor; sometimes this is the line supervisor's key role.
  •  While kaizen (at Toyota) usually delivers small improvements, the culture of continual aligned small improvements and standardization yields large results in the form of compound productivity improvement.  Hence the English usage of "kaizen" can be: "continuous improvement" or "continual improvement." Literally, it translates to: "good change."
  •  This philosophy differs from the "command-andcontrol" improvement programs of the midtwentieth century.  Kaizen methodology includes making changes and monitoring results, then adjusting.  Large-scale pre-planning and extensive project scheduling are replaced by smaller experiments, which can be rapidly adapted as new improvements are suggested.
  •  In modern usage, a focused kaizen that is designed to address a particular issue over the course of a week is referred to as a "kaizen blitz" or "kaizen event". These are limited in scope, and issues that arise from them are typically used in later blitzes.
  • Translation  The original kanji characters for this word are:  In Japanese this is pronounced "kaizen".  ("kai") means "change" or "the action to correct".  ("zen") means "good".  In Korean this is pronounced "ge sun"  ("ge sun") means "improvement" or "change for the better"
  • In Chinese this is pronounced "gai shan":  ("gǎi shàn") means "change for the better" or "improve".  ("gǎi") means "change" or "the action to correct".  ("shàn") means "good" or "benefit". "Benefit" is more related to the Taoist or Buddhist philosophy, which gives the definition as the action that 'benefits' the society but not one particular individual.  In other words, one cannot benefit at another's expense. The quality of benefit that is involved here should be sustained forever, in other words the "shan" is an act that truly benefits others.
  • History  In Japan, after World War II, American occupation forces brought in American experts in statistical control methods and who were familiar with the War Department's Training Within Industry (TWI) training programs to restore the nation.  TWI programs included Job Instruction (standard work) and Job Methods (process improvement). In conjunction with the Shewhart cycle taught by W. Edwards Deming, and other statistics-based methods taught by Joseph M. Juran, these became the basis of the kaizen revolution in Japan that took place in the 1950s.
  • Implementation  The Toyota Production System is known for kaizen, where all line personnel are expected to stop their moving production line in case of any abnormality and, along with their supervisor, suggest an improvement to resolve the abnormality which may initiate a kaizen.
  • The cycle of kaizen activity can be defined as:  standardize an operation →  measure the standardized operation (find cycle time and amount of in-process inventory) →  gauge measurements against requirements →  innovate to meet requirements and increase productivity →  standardize the new, improved operations →  continue cycle ad infinitum.
  • THE FIVE FOUNDATION ELEMENTS OF KAIZEN:  1) Team work  2) Personal Discipline  3) Improved morale  4) Quality circles  5) Suggestions for improvement
  • OUT OF THIS FOUNDATION, Two KEY FACTORS ARISE:  1) Elimination of waste (muda) and efficiency  2) The Kaizen five - S framework for good housekeeping
  •  Seiri- tidiness  Seiton- Orderliness  Seiso- Cleanliness  Seiketsu- Standardized clean- up  Shitsuke - Discipline