This topic is about planning

1. Planning

2. Planning
Analysis the Present
Where are we now? (SWOT, Porter’s Five forces, Value chain
analysis, PESTEL analysis).
Deciding about Future
Where do we want to go? (Vision and Mission)
Business(es) to be in and market positions to stake out?
Buyer needs and groups to serve?
Outcomes to achieve?
Ways to go
How do we get there? (Strategies)

3. Porter Five Forces Model

4. Risk of Entry new Potential Competitors
Barriers to entry:
Brand loyalty
Absolute/total cost advantages
Economies of scale
Switching costs
Government regulation

5. 1-5
Cost Advantages of
Different Experience Curve Effects
$1
$1 .90
.80
.70
.81
.64
.49
.729
.512
.343
10% Cost
Reduction
20% Cost
Reduction
30% Cost
Reduction
1
Million
Units
2
Million
Units
4
Million
Units
8
Million
Units
Cost
per
Unit

6. Rivalry Among Established Companies
• The intensity of competitive rivalry in an industry arises
from:
• Industry’s competitive structure.
• Demand (growth or decline) conditions in industry.
• Height of industry exit barriers.
1-6

7. 1-7
The Bargaining Power of Buyers
Buyers are most powerful when:
 There are many small sellers and few large buyers.
 Buyers purchase in large quantities.
 A single buyer is a large customer to a firm.
 Buyers can switch suppliers at low cost.
 Buyers purchase from multiple sellers at once.
 Buyers can easily vertically integrate to compete with suppliers.

8. 1-8
The Bargaining Power of Suppliers
Suppliers have bargaining power when:
 Their products have few substitutes and are important to buyers.
 The buyer’s industry is not an important customer to the supplier.
 Differentiation makes it costly for buyers to switch suppliers.
 Suppliers can vertically integrate forward to compete with buyers and
buyers can’t integrate backward to supply their own needs.

9. Substitute Products
• The competitive threat of substitute products increases as
they come closer to serving similar customer needs.
• Complementors:
• Companies whose products are sold in tandem/bike with
another company’s products.
• Increased supply of a complementary product collaterally
increases demand for the primary product.
1-9

10. 4-10
Typical Company Value Chain
Distribution
And
Outbound
Logistics
Operations
Purchased
Supplies
and
Inbound
Logistics
Sales and
Marketing
Service
Profit
Margin
Product R&D, Technology, Systems Development
Human Resources Management
General Administration
Primary Activities and Costs
Support
Activities
and Costs

11. Vision
• Involves thinking strategically about
• Firm’s future business plans
• Where to “go”
Tasks include
• Creating a roadmap of the future
• Deciding future business position to stake out
• Providing long-term direction
• Giving firm a strong identity.
1-11

12. Vision
• A roadmap of a company’s future
• Future technology-product-customer focus
• Geographic and product markets to pursue
• Capabilities to be developed
• Kind of company management is trying to create
Copyright © 2001 Houghton Mifflin Company. All rights reserved. 1-12

13. Mission
Defines current business activities
Highlights boundaries of current business
Conveys
Who we are,
What we do, and Where we are now
Company specific, not generic —so as to give a company its
own identity
A company’s mission is not to make a profit !
The real mission is always—“What will we do to make a
profit?” 1-13

14. 1-14
Ways to Go: What are the Key Factors for
Competitive Success?
Competitive elements most affecting every
industry member’s ability to prosper
 Specific strategy elements
 Product attributes
 Resources
 Competencies
 Competitive capabilities
KSFs spell the difference between
 Profit and loss
 Competitive success or failure

15. 1-15
Identifying Industry
Key Success Factors
Answers to three questions pinpoint KSFs
 On what basis do customers choose between
competing brands of sellers?
 What resources and competitive capabilities does a
seller need to have to be competitively successful?
 What does it take for sellers to achieve a sustainable
competitive advantage?

16. 1-16
Which Companies are in Strongest /
Weakest Positions?
One technique for revealing the different
competitive positions of industry rivals
is strategic group mapping
A strategic group
consists of those
rivals with similar
competitive
approaches in
an industry

17. 1-17
Strategic Group Mapping
Firms in same strategic group have two or more
competitive characteristics in common
 Sell in same price/quality range
 Cover same geographic areas
 Be vertically integrated to same degree
 Have comparable product line breadth
 Emphasize same types of distribution channels
 Offer buyers similar services
 Use identical technological approaches

18. 1-18
Procedure for Constructing a
Strategic Group Map
STEP 1: Identify competitive characteristics that
differentiate firms in an industry from one another
STEP 2: Plot firms on a two-variable map using pairs of
these differentiating characteristics
STEP 3: Assign firms that fall in about the same strategy
space to same strategic group
STEP 4: Draw circles around each group, making circles
proportional to size of group’s respective share of
total industry sales

19. 1-19
Example: Strategic Group Map of
the Garments Industry
Quality
Overall Cost to Players of Video Games
Low Medium High
High
Medium High
Medium
Low
Garments
Garments
Garments
Garments

20. Understanding a Company’s Strategy -- What to
Look For
Pattern
of Actions
That Define
Strategy
Actions to strengthen
resources &
capabilities
Actions to diversify Actions to outcompete rivals
Responses to
changing external
circumstances
Actions to alter
geographic
coverage
Actions to form strategic
alliances and collaborative
partnerships
How functional
activities are
managed
Efforts to pursue
new opportunities or
defend against threats
Actions to merge or
acquire rival companies