0
STRATEGIC PLANNING AND BUDGETING Part 1:  Business Model and Strategy Case Study, Concepts and Debatable Ideas Kenny Ong C...
Intro: CNI <ul><li>20 years old </li></ul><ul><li>Core Business: MLM </li></ul><ul><li>Others: Contract Manufacturing, Exp...
History of Strategic Planning and Budgeting
Planning in the “old” days <ul><li>Budget ‘top down’ – no questions asked </li></ul><ul><li>Only two budget goals – revenu...
Problems from the start
Problems from the start (1/2) <ul><li>No money </li></ul><ul><li>Split Objectives: Sales? Share Price? Image? </li></ul><u...
Problems from the start (2/2) <ul><li>Budgeting for known, consistent, and predictable business conditions </li></ul><ul><...
Today’s Agenda
Summary: Planning & Budgeting <ul><li>L ong-term Plans </li></ul><ul><li>O bjectives </li></ul><ul><li>S trategies </li></...
Summary: Today’s presentation 1. Business Model 2. Strategy 3. Alignment 4. Resources
Assumptions 1: Audience <ul><li>Business </li></ul><ul><li>Government </li></ul><ul><li>Non-profit </li></ul>
Assumptions 2: Starting Point <ul><li>Wanting to  start  proper planning & budgeting process, or </li></ul><ul><li>Wanting...
1. Get the right Business Model first
<ul><li>How to fail without trying </li></ul>1. Wrong Business Model
The Roadmap to Failure   Fred Wiersema and   Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics...
Denial and Defense <ul><li>“ It’s not really good value our competitor is offering, because it doesn’t include a lot of ou...
The Roadmap to Failure   Fred Wiersema and   Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics...
Ad Hoc Tactics <ul><li>Selectively hold discounts to hold business that has started to go elsewhere </li></ul><ul><li>Intr...
The Roadmap to Failure   Fred Wiersema and   Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics...
<ul><li>“ What is the moral of the story?” </li></ul>
What is the Business Model? USP Market  Discipline Profit Model
Intro: Market Discipline <ul><li>Mamak stall </li></ul>
Intro: Market Discipline <ul><li>&quot;Exactly what I need&quot; </li></ul><ul><li>Customized products </li></ul><ul><li>P...
Strategy: Value Disciplines Operational Excellence (low cost producer) Ref:  The Discipline of Market Leaders , Michael Tr...
<ul><li>Product Leadership </li></ul><ul><li>New, state of the art products or services </li></ul><ul><li>Risk takers </li...
The McPlaybook* <ul><li>Make it easy to eat </li></ul><ul><li>50% drive-thru </li></ul><ul><li>Meals held in one hand </li...
Strategy: Value Disciplines Operational Excellence (low cost producer) Ref:  The Discipline of Market Leaders , Michael Tr...
Strategy: Value Disciplines Operational Excellence (low cost producer) Ref:  The Discipline of Market Leaders , Michael Tr...
Intro: Market Discipline * Treacy & Wiersema,  The Discipline of Market Leaders , 1995 Product/Service Attributes Relation...
Intro: Market Discipline * Treacy & Wiersema,  The Discipline of Market Leaders , 1995 Product/Service Attributes Price Qu...
Intro: Market Discipline * Treacy & Wiersema,  The Discipline of Market Leaders , 1995 Product/Service Attributes √ Brand ...
Intro: Market Discipline * Treacy & Wiersema,  The Discipline of Market Leaders , 1995 Product/Service Attributes √ √ √ √ ...
Strategy: Disciplines Operational Excellence (low cost producer) Ref:  The Discipline of Market Leaders , Michael Treacy &...
Summary: Today’s presentation 1. Business Model    Done 2. Strategy 3. Alignment 4. Resources
2. Set the Strategies ‘Hope’ is not a strategy
What is Strategic Planning? Strategic  Planning Variables: Research Growth Risks Stakeholders Constraints SWOT Misc. Outpu...
Before we start… <ul><li>Which comes first? </li></ul><ul><li>Strategies -> KPI? </li></ul><ul><li>KPI -> Strategies? </li...
Step 1: Analysis <ul><li>SWOT </li></ul><ul><li>PESTEL </li></ul><ul><li>Scenario Analysis </li></ul>
SWOT: Opportunities & Threats <ul><li>Opportunities </li></ul><ul><li>= </li></ul><ul><li>Taking advantage of ‘Trends’ </l...
Downturn Trends?
Downturn Trends?
Downturn Trends?
Downturn Trends?
SWOT: General Strategic Risks <ul><li>Industry </li></ul><ul><ul><li>Margin Squeeze </li></ul></ul><ul><ul><li>Rising R&D/...
PESTEL and Scenarios Legal Environment Technology Social Economic Political Scenario 3 Scenario 2 Scenario 1
Business Situation vs. Focus Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer ‘ Change’ mgmt Redu...
Business Situations vs. Focus Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer ‘ Change’ mgmt Red...
Step 2: What is your Goal? <ul><li>Cost Reduction </li></ul><ul><li>Growth </li></ul>
Strategies for Growth “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com   <ul><li>Base Retention </li>...
Growth <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distribution </li></...
Growth thru Expansion <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distr...
Growth thru Expansion <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distr...
Transformative Growth <ul><li>Transformative </li></ul><ul><li>Portfolio refocus </li></ul><ul><li>Diversification </li></...
Cross Sector Transformation www.myCNI.com.my www.OOBEY.com   Traditional Alternative Incremental
Cross Sector Transformation New Delivery, New Sources, Existing Resources Oil, Gas, Electricity, Coal Biomass, Nuclear, Et...
Step 3: Strategy “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com   <ul><li>Base Retention </li></ul>...
How Markets determine Growth Strategies (1) <ul><li>Growth Rate </li></ul>www.myCNI.com.my www.OOBEY.com   <ul><li>Base Re...
<ul><li>Churn Rate </li></ul>How Markets determine Growth Strategies (2) www.myCNI.com.my www.OOBEY.com   <ul><li>Base Ret...
How Markets determine Growth Strategies (3) <ul><li>Example: XYZ Sector </li></ul>www.myCNI.com.my www.OOBEY.com   <ul><li...
<ul><li>Create better ‘Value’ proposition </li></ul><ul><li>Neutralize competitor advantages </li></ul><ul><li>Buy Market ...
Buying Market Share: Acquisition strategy No evidence of previous company One Kingdom Pre-integration Blueprint Slow Trigg...
Buying Market Share: Side notes on Funding www.myCNI.com.my www.OOBEY.com   *Adapted from Warren Buffet’s acquisition stra...
Strategy 4: Invade Adjacent Markets <ul><li>Adjacent Market = Important Similarities and Large Differences in: </li></ul><...
Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com   Traditional Alternative Incremental
Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com   Example: Energy Sector Traditional Utility Alternativ...
Strategy 4: Invade Adjacent Markets Upstream Midstream Downstream Distribution Conversion Raw Mat Vendors/Services www.myC...
<ul><li>Is it a promising market? </li></ul><ul><ul><li>Best when market is new and not stable </li></ul></ul><ul><ul><li>...
<ul><li>Can you match the Standards of Competition in this Market? </li></ul><ul><ul><li>You do have to meet the quality l...
<ul><li>Make or Buy? </li></ul><ul><ul><li>It is easier to meet the standards of competition if you buy an existing player...
Strategy 5: Acquire new Business <ul><li>No core advantage to bring in </li></ul><ul><li>Investors mind-set vs. Managers m...
Thank You. soft copy of slides:  www.totallyunrelatedrandomanddebatable.blogspot.com
Upcoming SlideShare
Loading in...5
×

Strategic Planning And Budgeting Part 1: Business Model and Strategy

17,746

Published on

ABF Budgeting, Forecasting and Financial Planning Conference, Feb 2009

*Understanding what strategic planning is and why it is important
*Clarify the difference between vision, mission statement, goals and objectives
*The external environment: The need to understand the economic cycle
*SWOT and PESTEL analysis
*Tying the strategic plan to the budget

Published in: Business
5 Comments
24 Likes
Statistics
Notes
No Downloads
Views
Total Views
17,746
On Slideshare
0
From Embeds
0
Number of Embeds
7
Actions
Shares
0
Downloads
1,984
Comments
5
Likes
24
Embeds 0
No embeds

No notes for slide
  • Transcript of "Strategic Planning And Budgeting Part 1: Business Model and Strategy"

    1. 1. STRATEGIC PLANNING AND BUDGETING Part 1: Business Model and Strategy Case Study, Concepts and Debatable Ideas Kenny Ong CNI Holdings Berhad
    2. 2. Intro: CNI <ul><li>20 years old </li></ul><ul><li>Core Business: MLM </li></ul><ul><li>Others: Contract Manufacturing, Export/Trading, eCommerce </li></ul><ul><li>Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan, Oman, United States, Vietnam </li></ul><ul><li>Staff force: ± 500 </li></ul><ul><li>Distributors: 200,000 </li></ul><ul><li>Products: Consumer Goods and Services </li></ul>
    3. 3. History of Strategic Planning and Budgeting
    4. 4. Planning in the “old” days <ul><li>Budget ‘top down’ – no questions asked </li></ul><ul><li>Only two budget goals – revenue, expenses </li></ul><ul><li>The only planning we needed to do was “do better than last year” </li></ul><ul><li>Planning was ‘bottom up’ - compilation of plans within set budget </li></ul><ul><li>No one knew what the other was planning </li></ul><ul><li>Accounting’s role was only to compile budget for approval </li></ul><ul><li>KPIs were not used </li></ul><ul><li>Sales was resource priority, everything else not important </li></ul><ul><li>Assumed no major changes in market </li></ul><ul><li>R&D was ‘bottom up’ </li></ul>
    5. 5. Problems from the start
    6. 6. Problems from the start (1/2) <ul><li>No money </li></ul><ul><li>Split Objectives: Sales? Share Price? Image? </li></ul><ul><li>Independent entities </li></ul><ul><li>Accounts controlling schedule </li></ul><ul><li>S&M always running over budget </li></ul><ul><li>Compounding activities </li></ul><ul><li>BOD expectations too high without proper explanation nor justification </li></ul><ul><li>Lack of Market research </li></ul><ul><li>Expenses not spent gets punished </li></ul>
    7. 7. Problems from the start (2/2) <ul><li>Budgeting for known, consistent, and predictable business conditions </li></ul><ul><li>Never learn from past mistakes, usually in under-budgeting (e.g. staff and PCs) </li></ul><ul><li>Wrong Business Model – blame Budgeting & Planning. Having a good planning process cannot correct a bad business model </li></ul><ul><li>Focusing on the Process (KPIs), instead of “Business” </li></ul><ul><li>Planning & budgeting treated as separate processes by businesses/functions </li></ul>
    8. 8. Today’s Agenda
    9. 9. Summary: Planning & Budgeting <ul><li>L ong-term Plans </li></ul><ul><li>O bjectives </li></ul><ul><li>S trategies </li></ul><ul><li>E nablers </li></ul><ul><li>R esources </li></ul>Also known as L.O.S.E.R.
    10. 10. Summary: Today’s presentation 1. Business Model 2. Strategy 3. Alignment 4. Resources
    11. 11. Assumptions 1: Audience <ul><li>Business </li></ul><ul><li>Government </li></ul><ul><li>Non-profit </li></ul>
    12. 12. Assumptions 2: Starting Point <ul><li>Wanting to start proper planning & budgeting process, or </li></ul><ul><li>Wanting to improve planning & budgeting process </li></ul>
    13. 13. 1. Get the right Business Model first
    14. 14. <ul><li>How to fail without trying </li></ul>1. Wrong Business Model
    15. 15. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
    16. 16. Denial and Defense <ul><li>“ It’s not really good value our competitor is offering, because it doesn’t include a lot of our features.” - ABC vs Air Asia </li></ul><ul><li>“ It’s good value but not in our preferred customer market.” - ABC vs Toyota </li></ul><ul><li>“ Sure they’re hurting us, but with their unfair advantage, what can we do?” – ABC vs MILO </li></ul><ul><li>“ The rules we are playing by have always worked before” – AMEX vs VISA </li></ul>
    17. 17. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
    18. 18. Ad Hoc Tactics <ul><li>Selectively hold discounts to hold business that has started to go elsewhere </li></ul><ul><li>Introduce new promotions, terms, conditions, and offers to confuse and cloud the market </li></ul><ul><li>Beef up customer service by adding people to fix mess-ups and quicken delayed shipments </li></ul><ul><li>Delay capital investments and adjust accounting methods to portray quarterly financial results more favorably </li></ul><ul><li>Introduce “new and improved” products that are new in form, but not in substantive ways that are of consequence to purchasers </li></ul><ul><li>Introduce Balanced Scorecards and Performance Management Systems </li></ul>
    19. 19. The Roadmap to Failure Fred Wiersema and Mike Treacy Performance Time Clear Sailing Today’s performance Ad-hoc Tactics Denial & Defense Doom Projections Overdue Failure The Moment of Truth X Performance Freefall Tomorrow’s actual performance Downpresure of Unclear Strategy
    20. 20. <ul><li>“ What is the moral of the story?” </li></ul>
    21. 21. What is the Business Model? USP Market Discipline Profit Model
    22. 22. Intro: Market Discipline <ul><li>Mamak stall </li></ul>
    23. 23. Intro: Market Discipline <ul><li>&quot;Exactly what I need&quot; </li></ul><ul><li>Customized products </li></ul><ul><li>Personalized communications </li></ul><ul><li>&quot;They're very responsive&quot; </li></ul><ul><li>Preferential service and flexibility </li></ul><ul><li>Recommends what I need </li></ul><ul><li>&quot;I'm very loyal to them&quot; </li></ul><ul><li>Helps us to be a success </li></ul>&quot;They are the most innovative&quot; &quot;Constantly renewing and creative&quot; &quot;Always on the leading edge&quot; &quot;A great deal!&quot; Excellent/attractive price Minimal acquisition cost and hassle Lowest overall cost of ownership &quot;A no-hassles firm&quot; Convenience and speed Reliable product and service Product Leadership Operational Excellence Customer Intimacy
    24. 24. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    25. 25. <ul><li>Product Leadership </li></ul><ul><li>New, state of the art products or services </li></ul><ul><li>Risk takers </li></ul><ul><li>Meet volatile customer needs </li></ul><ul><li>Fast concept-to- counter </li></ul><ul><li>Never satisfied - obsolete own and competitors' products </li></ul><ul><li>Learning organization </li></ul>Strategy: Value Disciplines <ul><li>Operational Excellence </li></ul><ul><li>Competitive price </li></ul><ul><li>Error free, reliable </li></ul><ul><li>Fast (on demand) </li></ul><ul><li>Simple </li></ul><ul><li>Responsive </li></ul><ul><li>Consistent information for all </li></ul><ul><li>Transactional </li></ul><ul><li>'Once and Done' </li></ul><ul><li>Customer Intimacy </li></ul><ul><li>Management by Fact </li></ul><ul><li>Easy to do business with </li></ul><ul><li>Have it your way (customization) </li></ul><ul><li>Market segments of one </li></ul><ul><li>Proactive, flexible </li></ul><ul><li>Relationship and consultative selling </li></ul><ul><li>Cross selling </li></ul>www.myCNI.com.my www.OOBEY.com
    26. 26. The McPlaybook* <ul><li>Make it easy to eat </li></ul><ul><li>50% drive-thru </li></ul><ul><li>Meals held in one hand </li></ul><ul><li>Make it easy to prepare </li></ul><ul><li>High Turnover </li></ul><ul><li>Tasks simple to learn & repeat </li></ul><ul><li>Make it quick </li></ul><ul><li>“ Fast Food” </li></ul><ul><li>Tests new products for Cooking Times </li></ul><ul><li>Make what customers want </li></ul><ul><li>Prowls market for new products </li></ul><ul><li>Monitored field tests </li></ul>*Adapted from: Businessweek , Februrary 5 th 2007 www.myCNI.com.my www.OOBEY.com
    27. 27. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    28. 28. Strategy: Value Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
    29. 29. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Relationship Image
    30. 30. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes Price Quality Time Selection √ √ Smart Shopper Relationship Image Operational Excellence : Quality and selection in key categories with unbeatable prices
    31. 31. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ Brand Time Function √ √ Best Product Relationship Image Product Leadership: Unique products and services that push the standards
    32. 32. Intro: Market Discipline * Treacy & Wiersema, The Discipline of Market Leaders , 1995 Product/Service Attributes √ √ √ √ Service Trusted Brand Relationship Image Customer Intimacy: Personal service tailored to produce results for customer and build long-term relationships Relations
    33. 33. Strategy: Disciplines Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution)
    34. 34. Summary: Today’s presentation 1. Business Model  Done 2. Strategy 3. Alignment 4. Resources
    35. 35. 2. Set the Strategies ‘Hope’ is not a strategy
    36. 36. What is Strategic Planning? Strategic Planning Variables: Research Growth Risks Stakeholders Constraints SWOT Misc. Output: Plans Priorities KPIs
    37. 37. Before we start… <ul><li>Which comes first? </li></ul><ul><li>Strategies -> KPI? </li></ul><ul><li>KPI -> Strategies? </li></ul>
    38. 38. Step 1: Analysis <ul><li>SWOT </li></ul><ul><li>PESTEL </li></ul><ul><li>Scenario Analysis </li></ul>
    39. 39. SWOT: Opportunities & Threats <ul><li>Opportunities </li></ul><ul><li>= </li></ul><ul><li>Taking advantage of ‘Trends’ </li></ul>Threats = Strategic Risk Management
    40. 40. Downturn Trends?
    41. 41. Downturn Trends?
    42. 42. Downturn Trends?
    43. 43. Downturn Trends?
    44. 44. SWOT: General Strategic Risks <ul><li>Industry </li></ul><ul><ul><li>Margin Squeeze </li></ul></ul><ul><ul><li>Rising R&D/CAPEX </li></ul></ul><ul><ul><li>Overcapacity </li></ul></ul><ul><ul><li>Commoditization </li></ul></ul><ul><ul><li>Deregulation </li></ul></ul><ul><ul><li>Increased power among suppliers </li></ul></ul><ul><ul><li>Extreme business-cycle volatility </li></ul></ul><ul><li>Technology </li></ul><ul><ul><li>Shift in technology </li></ul></ul><ul><ul><li>Patent expiration </li></ul></ul><ul><ul><li>Process becomes obsolete </li></ul></ul><ul><li>Brand </li></ul><ul><ul><li>Erosion </li></ul></ul><ul><ul><li>Collapse </li></ul></ul><ul><li>Competitor </li></ul><ul><ul><li>Emerging global rivals </li></ul></ul><ul><ul><li>Gradual market-share gainer </li></ul></ul><ul><ul><li>One-of-a-kind competitor </li></ul></ul><ul><li>Customer </li></ul><ul><ul><li>Customer priority shift </li></ul></ul><ul><ul><li>Increasing customer power </li></ul></ul><ul><ul><li>Over reliance on a few customers </li></ul></ul><ul><li>Project </li></ul><ul><ul><li>R&D failure </li></ul></ul><ul><ul><li>IT failure </li></ul></ul><ul><ul><li>Business development failure </li></ul></ul><ul><ul><li>Merger or acquisition failure </li></ul></ul><ul><li>Stagnation </li></ul><ul><ul><li>Flat or declining volume </li></ul></ul><ul><ul><li>Volume up, price down </li></ul></ul><ul><ul><li>Weak pipeline </li></ul></ul>Adrian J. Slywotzky and John Drzik
    45. 45. PESTEL and Scenarios Legal Environment Technology Social Economic Political Scenario 3 Scenario 2 Scenario 1
    46. 46. Business Situation vs. Focus Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer ‘ Change’ mgmt Reduce Fat Continuity Everyone Happy Innovation Acquire Profits Build momentum Sales Cash Flow Talent Mgmt Innovation/R&D Early wins Slow Down HR Costs Top Talent focus Sales, Sales, Sales Increase attrition www.myCNI.com.my www.OOBEY.com
    47. 47. Business Situations vs. Focus Upturn Flat Downturn Fight Complacency Sharpen Edge Keep Momentum Conquer ‘ Change’ mgmt Reduce Fat Continuity Everyone Happy Innovation Acquire Profits Build momentum Sales Cash Flow Talent Mgmt Stack R&D Early wins Slow Down HR Costs Top Talent focus Stack Sales Increase attrition Many times, you need a different CEO/Leader/Management Team for each business situation www.myCNI.com.my www.OOBEY.com
    48. 48. Step 2: What is your Goal? <ul><li>Cost Reduction </li></ul><ul><li>Growth </li></ul>
    49. 49. Strategies for Growth “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain </li></ul><ul><li>Positioning </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>GROWTH
    50. 50. Growth <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distribution </li></ul><ul><li>Compensate </li></ul><ul><li>Transformative </li></ul><ul><li>Portfolio refocus </li></ul><ul><li>Diversification </li></ul>Easier Tougher www.myCNI.com.my www.OOBEY.com
    51. 51. Growth thru Expansion <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distribution </li></ul><ul><li>Compensate </li></ul><ul><li>Gain Scale to compete </li></ul><ul><li>Integrated Solutions </li></ul><ul><li>Financial Growth </li></ul><ul><li>Supply (security, mix) </li></ul><ul><li>Developing markets </li></ul><ul><li>High cost of Extra Capacity </li></ul><ul><li>Private Equity </li></ul><ul><li>Expanding Sovereign Funds </li></ul>www.myCNI.com.my www.OOBEY.com
    52. 52. Growth thru Expansion <ul><li>Expansion </li></ul><ul><li>Consolidate </li></ul><ul><li>Geographic </li></ul><ul><li>Distribution </li></ul><ul><li>Compensate </li></ul><ul><li>De-regularization </li></ul><ul><li>Demand outstrip supply </li></ul><ul><li>Revenue Mix – Tax optimization </li></ul><ul><li>Talent </li></ul><ul><li>New, Low-cost Entrants </li></ul><ul><li>Undervalued Big Players </li></ul><ul><li>Newer Assets </li></ul>www.myCNI.com.my www.OOBEY.com
    53. 53. Transformative Growth <ul><li>Transformative </li></ul><ul><li>Portfolio refocus </li></ul><ul><li>Diversification </li></ul><ul><li>New Business Lines </li></ul><ul><li>Selling/Spin-off non-core </li></ul><ul><li>Increase product line </li></ul><ul><li>New customers </li></ul><ul><li>New technologies* </li></ul><ul><li>Complementary Business </li></ul><ul><li>Up-down Supply Chain </li></ul><ul><li>Patent </li></ul><ul><li>Convergence anticipation </li></ul>www.myCNI.com.my www.OOBEY.com
    54. 54. Cross Sector Transformation www.myCNI.com.my www.OOBEY.com Traditional Alternative Incremental
    55. 55. Cross Sector Transformation New Delivery, New Sources, Existing Resources Oil, Gas, Electricity, Coal Biomass, Nuclear, Ethanol, Wind, Solar www.myCNI.com.my www.OOBEY.com Example: Energy Sector Traditional Utility Alternative Energy Incremental Technology
    56. 56. Step 3: Strategy “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain </li></ul><ul><li>Positioning </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>GROWTH
    57. 57. How Markets determine Growth Strategies (1) <ul><li>Growth Rate </li></ul>www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain (Acquisitions) </li></ul><ul><li>Market Positioning </li></ul><ul><li>Share Gain </li></ul><ul><li>Base Retention </li></ul>Strategy <ul><li>Lose customers slower than competitors </li></ul><ul><li>Create scale economics, squeeze costs </li></ul><ul><li>Maintain market share in strategic segments </li></ul><ul><li>Prepare for market decline </li></ul><ul><li>Competitors focus too much on getting new customers </li></ul>Why? Flat Fast Growth Rate
    58. 58. <ul><li>Churn Rate </li></ul>How Markets determine Growth Strategies (2) www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain </li></ul><ul><li>Adjacent Market </li></ul><ul><li>Share Gain (Acquisitions) </li></ul><ul><li>Adjacent Markets </li></ul>Strategy <ul><li>Lose customers slower than competitors </li></ul><ul><li>Customers are always open to the best value and offer </li></ul><ul><li>Desperate to gain revenue </li></ul><ul><li>Buying customer base is cheaper than own efforts </li></ul><ul><li>New products, old customers strategy </li></ul>Why? High Low Churn Rate
    59. 59. How Markets determine Growth Strategies (3) <ul><li>Example: XYZ Sector </li></ul>www.myCNI.com.my www.OOBEY.com <ul><li>Market Positioning </li></ul><ul><li>Share Gain (M&A) </li></ul><ul><li>Base Retention </li></ul><ul><li>Adjacent Markets (M&A) </li></ul>Fast Growth, Low Churn
    60. 60. <ul><li>Create better ‘Value’ proposition </li></ul><ul><li>Neutralize competitor advantages </li></ul><ul><li>Buy Market Share outright </li></ul><ul><ul><li>Price Premium </li></ul></ul><ul><ul><li>Operating Model </li></ul></ul><ul><ul><li>Integration </li></ul></ul>Strategy 2: Share Gain www.myCNI.com.my www.OOBEY.com
    61. 61. Buying Market Share: Acquisition strategy No evidence of previous company One Kingdom Pre-integration Blueprint Slow Trigger, Fast Bullet www.myCNI.com.my www.OOBEY.com Integration Operating Model Price Premium Buying Market Share Net Cost per Customer < Direct Acquire
    62. 62. Buying Market Share: Side notes on Funding www.myCNI.com.my www.OOBEY.com *Adapted from Warren Buffet’s acquisition strategies <ul><li>Cash from Stock sale </li></ul><ul><li>Issue more stock </li></ul><ul><li>Cash from Earnings </li></ul><ul><li>Cash from Borrowings </li></ul>OK, but not preferred Preferable
    63. 63. Strategy 4: Invade Adjacent Markets <ul><li>Adjacent Market = Important Similarities and Large Differences in: </li></ul><ul><li>Cost Structure </li></ul><ul><li>Competitors </li></ul><ul><li>Customers </li></ul><ul><li>Critical Capabilities </li></ul>www.myCNI.com.my www.OOBEY.com
    64. 64. Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com Traditional Alternative Incremental
    65. 65. Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com Example: Energy Sector Traditional Utility Alternative Energy Incremental Technology
    66. 66. Strategy 4: Invade Adjacent Markets Upstream Midstream Downstream Distribution Conversion Raw Mat Vendors/Services www.myCNI.com.my www.OOBEY.com
    67. 67. <ul><li>Is it a promising market? </li></ul><ul><ul><li>Best when market is new and not stable </li></ul></ul><ul><ul><li>You must time your entry carefully </li></ul></ul><ul><ul><li>Entrenched companies usually delay embracing new technology or process </li></ul></ul><ul><li>Can you win in this market? </li></ul><ul><ul><li>Must be built on advantages that are tangible, practical and easily implemented </li></ul></ul>Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
    68. 68. <ul><li>Can you match the Standards of Competition in this Market? </li></ul><ul><ul><li>You do have to meet the quality level that is common in the market </li></ul></ul><ul><ul><li>Three Standards:- Technology , Relationships , Business-model </li></ul></ul><ul><ul><li>You must have 80 percent of the capabilities you need to match competitor’s Standards </li></ul></ul>Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
    69. 69. <ul><li>Make or Buy? </li></ul><ul><ul><li>It is easier to meet the standards of competition if you buy an existing player </li></ul></ul><ul><ul><li>Adjacent acquisitions must remain as a separate enterprise </li></ul></ul><ul><ul><li>Integrate Management Control (systems, technology) </li></ul></ul><ul><ul><li>Inter-transfer of management talent, knowledge and capability are important </li></ul></ul>Strategy 4: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
    70. 70. Strategy 5: Acquire new Business <ul><li>No core advantage to bring in </li></ul><ul><li>Investors mind-set vs. Managers mind-set </li></ul><ul><li>Value unlocking via operational improvements </li></ul><ul><li>Invest in Management/Leadership </li></ul><ul><li>Premium = Combined value > stand alone </li></ul>www.myCNI.com.my www.OOBEY.com
    71. 71. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×