New entrants Threat of new entrantsSuppliers Intensity of Buyers rivalryBargaining among Bargaining power of current power of suppliers competitors buyers Substitutes Threat of substitutes
Threat of new entrants. Factors such as economies of scale, brand loyalty, and capital requirements determine how easy or hard it is for new competitors to enter an industry. Threat of substitutes. Factors such as switching costs and buyer loyalty determine the degree to which customers are likely to buy a substitute product. Bargaining power of buyers. Factors such as number of customers in the market, customer information, and the availability of substitutes determine the amount of influence that buyers have in an industry. Bargaining power of suppliers. Factors such as the degree of supplier concentration and availability of substitute inputs determine the amount of power that suppliers have over firms in the industry. Current rivalry. Factors such as industry growth rate, increasing or falling demand, and product differences determine how intense the competitive rivalry will be among firms currently in the industry.
An analysis of the organization’s strengths, weaknesses, opportunities, and threats. The internal environmental factors analyzed for strengths and weaknesses are management, mission, resources, systems process, and structure. The external environmental factors analyzed for opportunities and threats are customers, competitors, suppliers, labor force, shareholders, society, technology, the economy, and government.
Strengths-S Weaknesses-W Leave Blank List Strengths List Weaknesses SO Strategies WO StrategiesOpportunities-O Use strengths to take advantage of Overcome weaknesses by takingList Opportunities opportunities advantage of opportunities WT Strategies Threats-T ST Strategies Minimize weaknesses and avoid List Threats Use strengths to avoid threats threats
A strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs. High Low Market share High Question Stars Anticipated growth rate (growth strategy) marks (growth strategy) Dogs Cash cows (turnaround and (stability strategy) retrenchment strategies) Low
Cash cows(low growth, high market share) Businesses in this category generate large amounts of cash, but their prospects for future growth are limited. Stars(high growth, high market share) These businesses are in a fast-growing market, and hold a dominant share of that market. Their contribution to cash flow depends on their need for resources. Question marks(high growth, low market share) These businesses are in an attractive industry but hold a small market share percentage. Dogs(low growth, low market share) Businesses in this category do not produce, or consume, much cash. However, they hold no promise for improved performance.
Managers should “milk” cash cows for as much as they can, limit any new investment in them, and use the large amounts of cash generated to invest in stars and question marks with strong potential to improve market share. Heavy investment in stars will help take advantage of the market’s growth and help maintain high market share. The stars, of course, will eventually develop into cash cows as their markets mature and sales growth slows. The hardest decision for managers is related to the question marks. After careful analysis, some will be sold off and others turned into stars. The dogs should be sold off or liquidated as they have low market share in markets with low growth potential.
Product life cycle stages over time Sales Introduction stage Growth stage Maturity stage Decline stageChanging strategies over time Turnaround and Growth strategy retrenchment strategy Growth strategy Analyzing strategy Stability strategy Prospecting or analyzing Prospecting strategy (New firms enter the Defending strategy strategy market) (To develop new products)Portfolio analysis changes over time Question marks Stars Cash cows Dogs
Work breakdown structure(WBS) Work breakdown structure for consumer market study project Consumer market study Jim Questionnaire Report 1.0 2.0 Susan Jim Design Responses Software Report 1.1 1.2 2.1 2.2 Susan Steve Andy Jim Identify target Print questionnaire Develop software Input response data consumers Prepare mailing Test software Analyze results Develop draft labels Prepare report questionnaire Mail questionnaire & Pilot-test get responses questionnaire Finalize questionnaire Develop test data
Responsibility matrix Responsibility matrix for consumer market study projectWBS Item Work Item Andy Jim Susan Steve Consumer market study P 1.0 Questionnaire P 1.1 Design P 1.2 Responses S P 2.0 Report P 2.1 Software P S 2.2 Report P
Gantt Chart Days Activity Person responsible 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140Identify target consumers SusanDevelop draft questionnaire SusanPilot-test questionnaire SusanFinalize questionnaire SusanPrint questionnaire StevePrepare mailing labels SteveMail questionnaire & get responses SteveDevelop data analysis software AndyDevelop software test data SusanTest software AndyInput response data JimAnalyze results JimPrepare report Jim 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140
Network diagram for consumer market study project(activity-in-the-box format) Prepare mailing labels 5 Steve 2 Review Mail Identify target Develop draft Pilot-test comments & Print questionnaire Input Analyze Prepare report consumers questionnaire questionnaire finalize questionnaire & get response data results questionnaire responses 1 2 1 6 1 1 1 11 Susan 3 2 Susan 3 Susan 4 Susan 5 6 Steve 9 Steve Jim 7 Jim 8 Jim 0 0 0 5 1 2 3 0 Develop data analysis Test software software 1 1 7 Andy Andy 5 2 0 KEY: Activity description Develop Activity Duration software test data number estimate 8 Susan 2 Person responsible
Network diagram for consumer market study project(activity-on-the-arrow format) 6 Prepare Review mailing Mail Identify comments & labels questionnaire Input target Develop draft Pilot-test finalize & get response Analyze Prepare consumers questionnaire questionnaire questionnaire Print questionnaire responses data results report 1 1 1 1 1 2 3 4 5 7 0 1 2 3 Develop data Test analysis software software Develop software 9 test data KEY: Activity description 8 Person Event responsible Event number number Duration estimate
Work breakdown structure for the packaging machine project Packaging machine $100,000 Design Build Install & test $24,000 $60,000 $16,000
Self-actualization needs (self-development and realization) Esteem needs(self-esteem, recognition, status) Social needs (sense of belonging, love) Safety needs (security, protection) Physiological needs (hunger, thirst)
Needs were categorized as five levels of lower- to higher-order needs Individuals must satisfy lower-order needs before they can satisfy higher order needs. Satisfied needs will no longer motivate. Motivating a person depends on knowing at what level that person is on the hierarchy. Hierarchy of needs Lower-order (external): physiological, safety Higher-order (internal): social, esteem, self-actualization
Self-actualization needs Opportunities for skill development, the chance to be creative, promotion, and the ability to have complete control over their jobs. Esteem needs Merit pay raises, recognition, challenging tasks, participation in decision making, and opportunity for advancement. Social needs Opportunity to interact with others, to be accepted, and to have friends. Schedule employee parties, picnics, trips, and sports teams. Safety needs Safe working conditions, job security, and fringe benefits(medical insurance/sick pay/pensions). Physiological needs Adequate salary, work breaks, and safe working conditions.
Financial How should we appear to shareholders? External Operational Vision and strategyHow should we appear to How do we manage ourour customers? operational processes? Development How will we sustain our ability to change and improve?
Financial Total costs Cost per customer Labor costs Processing costs External Total revenue OperationalMarket share Revenue per customer Equipment or staff availabilityCustomer satisfaction Operating profit Waiting timesCustomer loyalty Profit per customer Throughput timesRepurchase intentions Number of customers by typeRetention rates Number of staff by processNew customers Development On-time deliveryNumber of complaints Number of suggestions Facility utilizationType of complaints Number of improvements Number of faults Employees involved in improvement Teams Staff satisfaction Staff turnover Number of service innovations
Area Ratio Calculation Information providedFinance Gross profit margin (sales-COGS)/sales Efficiency of operations and product pricing Net profit margin (net profit/income)/sales Product profitabilityProfitability Return on total capital expenditures or ability of assets Return on investment (Net profit/income)/total assets to generate profit Current ratio Current assets/current liabilities Ability to pay short-term debtLiquidity Stronger measure of bill-paying ability because Quick ratio (Current assets-inventory)/current liabilities inventory may be slow to sell for cash Proportion of assets owned by an organization; theLeverage Debt to equity Total liabilities/owner’s equity lower the ratio, the more solvent the firm and the easier it will be to get credit/funds. Efficiency of controlling investment in inventory; theOperations Inventory turnover Cost of goods sold/average inventory larger the number, the better, because products are sold faster.
Area Ratio Calculation Information providedMarketing Organization’s competitive position; the larger the Market share Company sales/total industry sales number, the better, because it is outselling competitors. How many presentations it takes to make one sale; the Sales to presentation Sales completed/sales presentations made lower the number, the better, because less time is spent making nonproductive presentations.Human resources No. of employees absent/total no. of Ratio/percentage of employees not at work for a given Absenteeism employees time period No. of employees leaving/total no. of Ratio/percentage of employees who must be replaced Turnover employees in a given period, usually one year Workforce No. of a specific group/total no. of Ratio/percentage of women, Hispanics, African- composition employees Americans, and so on
Objective Ratio Calculation Meaning Tests the organization’s ability to meet short-term Current ratio Current assets/current liabilities obligationsLiquidity Current assets less inventories/current Tests liquidity more accurately when inventories turn Acid test liabilities over slowly or are difficult to sell The higher the ratio, the more leveraged the Debt to assets Total debt/total assets organizationLeverage Profits before interest and taxes/total Measure how far profits can decline before the Times interest earned interest charges organization is unable to meet its interest expenses The higher the ratio, the more efficiently inventory Inventory turnover Sales/inventory assets are being usedActivity The fewer assets used to achieve a given level of Total assets turnover Sales/total assets sales, the more efficiently management is using the organization’s total assets Identifies the profits that various products are Profit margin on sales Net profit after taxes/total salesProfitability generating Return on investment Net profit after taxes/total assets Measure the efficiency of assets to generate profits