2. Strategic management
strategic and day-to-day management
the components of strategic management
strategic analysis
strategic choice
strategic implementation
Importance of the business environment
PEST analysis
Strategic Analysis
3. Strategic Analysis
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
4. Industry competitors
Porter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
5. Industry competitors
Rivalry among
existing firms
Porter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
10. Strategic Analysis
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
factors affecting each of the forces
11. Strategic Analysis
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
factors affecting each of the forces
limitations of the five forces model
12. Strategic Analysis
Value chain analysis
nature of value chain analysis
primary activities
inbound logistics
operations
outbound logistics
marketing and sales
service
secondary activities
procurement
technological development
human resources management
firm infrastructure
14. Strategic Choice
Environment or market-based strategy
types
cost leadership
differentiation
focus
importance of establishing:-
the basis of a firm's competitive advantages
the nature of the target market
Resource-based strategy
exploiting core competencies
defining & establishing core competencies
15. Growth by internal expansion
product differentiation
vertical integration
diversification
Growth by external expansion: mergers
and takeovers
horizontal mergers
vertical mergers
conglomerate mergers
Growth Strategy
16. Alternative growth strategy
GROWTH OF A FIRM
Internal expansion External expansion
(1) Differentiation
Horizontal expansion
(same product, increase
in market share)
(1) Horizontal integration
Mergers of firms
producing the same
product
(2) Vertical integration
Different products, but
belonging to different
stages of same product
(2) Vertical integration
Mergers of firms producing
at different stages of same
process
(3) Conglomerate
Diversification -
introduction of totally
different products
(3) Conglomerate
Diversification - merger of
firms producing totally
unrelated products
17. Growth Strategy
Growth by internal expansion
financing internal growth
borrowing
share issue
ploughing-back profit
the takeover constraint
18. Growth Strategy
Growth by internal expansion (cont.)
growth through vertical integration
backward integration ('upstream' integration)
forward integration ('downstream' integration)
why vertically integrate?
economies of scale
reduced uncertainty
monopoly power
• barriers to entry
growth through diversification
advantages
• when existing market is saturated
• spreads risks
19. Growth Strategy
Growth through mergers and takeovers
types of merger and takeover
horizontal
vertical
conglomerate
motives for mergers and takeovers
growth
economies of scale
monopoly power
increased market valuation
reduced uncertainty
other motives
effects of mergers on consumers
20. Financing Growth and Investment
Sources of business finance
internal sources
ploughed-back profit
external sources
banks
• mainly short- and medium-term finance
stock market
• longer-term finance
problem of 'short-termism'
international sources
21. The role of the Stock Exchange
primary market
secondary market
advantages
brings together savers & firms seeking finance
regulates firms and helps encourage confidence
facilitates mergers and takeovers
reduces transaction costs of investment finance
disadvantages
cost of getting listed
possible short-termism and instability
Financing Growth and Investment
22. Is the stock market efficient?
the efficient market hypothesis
share prices reflect information about
companies' current and expected future
performance
implications of stock market efficiency
benefit of speculation diminishes as efficiency
increases
perfect efficiency and share prices following a
'random walk'
Financing Growth and Investment
23. Staying Small
EU definition of SMEs
by number of employees
micro enterprises
small enterprises
medium enterprises
by turnover
28. Staying Small
Competitive advantage and small firms
flexibility
quality of service
production efficiency and low overheads
product development and innovation
Problems facing small businesses
selling and marketing
funding R&D
management skills
less ability to gain economies of scale
