Statragic controlling

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Statragic controlling

  1. 1. www.pwc.at/sustainabilityDay 2“Strategic controlling”Mag. Philipp Gaggl, BAVietnam University of CommerceHanoi, 10.4. – 14.4.2013
  2. 2. IV - Tools and instruments forstrategic controlExternal:portfolio, potential, benchmarking, sector structure, clientsatisfactionInternal:value chain, life cycle, learning curve, company cultureStrategy formulation:scenario analysis, gap analysis, SWOT analysisstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 2
  3. 3. Welcome to the second day!Repeating what we learned yesterday:• What is a strategy?• What is controlling?• What are the main functions of strategic controlling?• How is strategic controlling different from operational controlling?• What are the six elements of the strategic controlling cycle?• What value provides strategic controlling to management?strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 3
  4. 4. IV - Tools and instruments for strategic controlTools in relation to control areas Area tools Financial controlling Market • Portfolio analysis • Benchmarking • Peer group analysis • Stakeholder analysis • Sector structure analysis (five forces) Clients • ABC-analysis • Client satisfaction analysis • Target group analysis Products • Life cycle analysis • Conjoint analysis • Substitution analysis • Quality function deployment Processes • Value chain analysis (Porter) • Six-sigma analysis Ressources • Company culture analysis • Resource portfolio analysis • Core competency analysis • Human resource portfolio analysis • Technology portfolio analysis Operational controlling Financials • Cost structure analysis (target costing) • Brand-equity analysis • GAP analysis • PIMS analysis • Learning curve analysisstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 4
  5. 5. IV - Tools and instruments for strategic control Tools in relation to functions portfolio product life cycle analysis analyis assess prevent strategic experience curve gap analysis gap control potential analysis target costingstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 5
  6. 6. IV - Tools and instruments for strategic control External opportunities & risks vs. internal strengths andweaknesses external internal + opportunities strengths weaknesses risks -Team work:What are the external opportunities and risks and internal strengthsand weaknesses in your company?strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 6
  7. 7. IV - Tools and instruments for strategic control SWOT – BMWstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 7
  8. 8. IV - Tools and instruments for strategic control SWOT – P&Gstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 8
  9. 9. IV - Tools and instruments for strategic control SWOT – Indiastrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 9
  10. 10. IV - Tools and instruments forstrategic control - externalExternal:portfolio, potential, benchmarking, sector structure, clientsatisfactionstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 10
  11. 11. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrixOnce a company is following a diversification strategy, the challenge arises, how to distribute thecompany resources in the best possible way.In the second half of the 70s the Boston Consulting Group (BCG) developed the “growth sharematrix” or “BCG matrix”.Goal of this tool is to balance the resources invested in capital demanding and capital generatingbusiness units.Key value:• Provides analysis and evaluation of strategic business units or products• Allows to see the balance of a product or service portfolio• Highlights how many new and emerging products need to be developed to achieve a profitable business (how many question mark products are needed per cash cow)strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 11
  12. 12. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrixBasic structure:The BCG matrix is based on a two dimensional representation of success potentials of a strategic business unitThe first dimension is the one of market-growth:• Assumption is that all risks and opportunities of a company environment can be shown through a market-growth rate• Strong growing markets are an opportunity• Declining markets are a riskThe second dimension is the one of relative market share:• The relative market share includes the cumulated production amount• Thus also the cost structure and the competitive advantage versus the competitors are includedstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 12
  13. 13. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrix high low relative market share (comparison to strongest competitor) 2 1.5 1 0,5 0 +20 % star question mark high D +10 % C market growth 0% cash cow dog low -10 % A cash-flow B typical life cycle - 20 %strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 13
  14. 14. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrixKey elements of the BCG matrix:Following four areas can be identified by the matrix and inform strategic decisions: Question marks: Cash cows: • Relatively low market share in a strong • Business units with a very high relative growing market market share in a stagnating or slow growing market • Often an unused opportunity Stars: Dogs: • Business units with a relatively high • Low relative market share in a market share in a growing market stagnating market • They have a high gross cash flowstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 14
  15. 15. IV - Tools and instruments for strategic control - external Portfolio analysis / BCG matrix success own sales sales volume of relative market market % of total sales objects volume in Mio strongest share growth in % volume US$ competitor product XY 1. 2. 3. = 1. / 2. 4. 5. = sum / 1. product A 10 7 1,42 -10 % 24 % product B 20 80 0,25 -13 % 48 % product C 7 20 0,35 +10 % 17 % product D 4 3,2 1,25 +18 % 9,7 % sum 41 110 100 % relative market share (comparison to strongest competitor) Market share: Market growth: 2 1.5 1 0,5 0 • The competitors value is always 1 • The market growth is always +20 % star question mark D the real market growth of the +10 % • The business unit value is always C business unit relative to this onemarket growth 0% • The competitors market growth cash cow dog • Own sales volume / competitors is not put in relation -10 % A sales volume = relative market B share I(between 0 and 2) - 20 % strategic controlling, Philipp Gaggl, Hanoi April 2013 PwC Slide 15
  16. 16. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrixSteps towards a BCG matrix:The following steps build the basic information to create a BCG matrix1. Definition of the business units Products and groups of products are defined in business units2. Definition of market growth The growth or decline of the specific sales volume versus the past year, indicates the attractiveness of the market3. Definition of the market share The turnover of a specific business unit in relation to the turnover of the strongest competitor, defines the market share.4. Definition of the performance of a business unit The level of turnover per business unit defines the performance. In the graph this is represented by the size of the circle per business unit.5. Analysis based on the four-fields-matrix Both dimensions – market growth and market share – are combined in a portfolio overview6. Development of norm strategies On basis of the matrix, startegies for each business unit can be derivedstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 16
  17. 17. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrix Norm strategies: The following overview shows which startegies are usually taken respective to the four elements of the matrix: relative market share 2 1 0 +20 % Growth strategy: Investment strategy: • Strong growing market • High need for cash • High investment need • Gain market share as • Secure competitive long as market market growth advantage expands 0% > Invest > In or out Skimming strategy: De-investment strategy: • High cash flows • Hard to gain more • Low cash flow market share • Saturated market > Keep and skim > De-invest - 20 %strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 17
  18. 18. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrix - pharmastrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 18
  19. 19. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrix - Applestrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 19
  20. 20. IV - Tools and instruments for strategic control - externalPortfolio analysis / BCG matrix - KFCstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 20
  21. 21. IV - Tools and instruments for strategic control - externalGroup work:• Choose a company of your liking (your own, other one) and describe its main products/services in the BCG matrix.• Invent numbers and calculate them with the matrix formula• Establish the matrix with size and position of bubbles• How would a recommended strategy look likeTime: 15 minstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 21
  22. 22. IV - Tools and instruments for strategic control - externalCompetitive potential – GE/McKinsey matrixKey goals:Comparison of the two basic dimensions in one matrix of• market attractiveness• competitive strengthsThis matrix has been developed by the consulting company McKinsey and is thus called McKinseymatrix. The matrix provides a tool for diversified companies to invest the internal resources mosteffectively in certain products or business units.The main differences to the BCG matrix are the comparison of the market attractiveness instead ofthe market growth and the competitive strengths instead of the market share. The McKinsey matrixoffers a more differentiated picture of the situation, as there are more factors included and instead ofthe four quadrants of the BCG matrix, the McKinsey matrix has nine.• Competitive strength: internal strengths and weaknesses• Market attractiveness: external opportunities and risksstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 22
  23. 23. IV - Tools and instruments for strategic control - externalCompetitive potential – GE/McKinsey matrixKey steps to develop a McKinsey matrix:1. Definition of the influence factors for market attractiveness and competitive strengths: There are several internal and external influence factors – which need to be derived from the PIMS analysis. Exemplary factors are: internal factors external factors • market share • market volume and market • image growth rate • sales staff • inflation • product portfolio • regulatory framework • marketing • market cycles • quality / reliability • availability of human resources • client satisfaction • competitive structure • research and development • social issues • management competency • market entry barriers • client management • environmental issues • financial resources • profitability of sector • cost situation • political issues • production potential • technology availability • sales • legal issues competitive strengths market attractivenessstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 23
  24. 24. IV - Tools and instruments for strategic control - externalCompetitive potential – GE/McKinsey matrix2. Evaluation of the characteristics of the market strengths and market attractiveness: • In a second step the influence factors of the basic dimensions need to be weighted to see their relative importance. • This is done by weighting the influence factors on a scale (e.g. 0- 10) • This is done separately for the market attractiveness and the competitive strengths An example weighting scheme looks like this: 0 – 1 -2 -3 -4 – 5- 6 -7 -8 -9 -10 weighting weighted value weighted value factor product A product B product portfolio 0,15 0,3 0,9 marketing 0,1 0,5 0,5 client satisfaction 0,25 2 0,75 client management 0,2 1,4 0,8 financial resources 0,15 1,05 0,9 cost situation 0,15 0,9 0,45 total 1 6,15 4,3strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 24
  25. 25. IV - Tools and instruments for strategic control - externalCompetitive potential – GE/McKinsey matrix3. Representation of the business areas in a matrix: In this last step the positioning of a product or business unit is derived. The values calculated through the weighting of the influence factors are the basis. There are nine areas highlighted which influence strategic decision making. The following graph represents such a matrix: 10 • Each product is assessed by its high weighted internal influence market attractiveness factors and weighted external 6,6 area of binding influence factors e.g product A resources values market attractiveness 4 medium and competitive strength 9. area of freeing • this would translate to a 3,3 resources position in quadrant medium attractiveness and high low strength 0 low 3,3 medium 6,6 high 10 • Thus a investment strategy to bind resources to the product competitive strength needs to be donestrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 25
  26. 26. IV - Tools and instruments for strategic control - external Competitive potential – GE/McKinsey matrix Strategy implications of matrix product positioning: 10 Investment and growth strategy highmarket attractiveness 6,6 area of binding resources Selective strategy medium area of freeing 3,3 resources low Skimming or de-investment strategy 0 low 3,3 medium 6,6 high 10 competitive strength strategic controlling, Philipp Gaggl, Hanoi April 2013 PwC Slide 26
  27. 27. IV - Tools and instruments for strategic control - externalCompetitive potential – GE/McKinsey matrixApplication in practice:• The McKinsey matrix is less relevant in practical use, as it was over the course of the years not possible to derive some universally valid success and influence factors. Thus the assessment is very subjective.• Nevertheless the matrix is still in use especially in companies with divisional character.strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 27
  28. 28. IV - Tools and instruments for strategic control - externalCompetitive potential – GE/McKinsey matrixstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 28
  29. 29. IV - Tools and instruments for strategic control - externalCompetitive potential – GE/McKinsey matrixQuestion:• Where do you see the advantage and disadvantage of the GE/McKinsey matrix to the BCG matrix?• In which situations would you prefer which tool?strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 29
  30. 30. IV - Tools and instruments for strategic control - externalBenchmarkingBenchmarking is the continuous process to assess products, services and practices against thestrongest competitor.Even 500 years before Christ Sun Tzu, the Chinese general said “You don’t have to fear the outcomeof even 100 battles, if you know your enemy well”.Todays form of benchmarking has been developed in the second half of the 70s by the Xeroxcompany. Xerox analyzed the product value and functional abilities of it Japanese competitorscopying machines. Reason was that Xerox copiers where more cost intensive than the Japanesependant. On basis of the benchmarking results strategic decision were taken which put Xerox in a farbetter competitive position afterwards.Typical areas for benchmarking analysis are:• business practices, products, services, processes, functions of products etc.strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 30
  31. 31. IV - Tools and instruments for strategic control - externalBenchmarkingTypes of benchmarking:Product benchmarking:• Functions, value offering, performance and other elements for a product positioning are analyzed• It is the aim to highlight the key aspects of performance difference of the own products to the ones of the competitionProcess benchmarking:• The processes needed to generate the products or services are in focus• It is important to structure, define and quantify the processes to be able to compare them• Aim is to draw key insights how the own processes can be improved to increase the value of the products and servicesAdministrative benchmarking:• Focus are processes that only have a supportive function in the development of products or services• Examples are processes in human resource management, sales, marketing etc.• Aim is to improve the supporting processes to be a more effective organizationstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 31
  32. 32. IV - Tools and instruments for strategic control - externalBenchmarkingOperative benchmarking:• Processes that are explicitly focused on producing a product or service• Examples are the technological process in using raw material, the automated process in packaging a product etc.• Aim is to highlight areas for operative improvement and adapt processes accordinglyStrategic benchmarking:• The long term orientation of a company in respect to the positioning on the market is in focus• Examples are the strategic positioning of the own products in respect to client satisfaction, environmental pollution, or overall product portfolio• Aim is to get insights how to improve ones positioning on the marketWhich benchmarking “partners” are to be analyzed?It is key and often difficult to choose the right benchmarking partner. It is not necessary that thepartner is from the same industry sector but a company that is likely to have better processes etc.than the own and is considered best in class in the analyzed aspects. Key to successful benchmarkingis the availability of data.strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 32
  33. 33. IV - Tools and instruments for strategic control - externalBenchmarkingExemplary benchmarking overview: Company product value product price product market best practice availability presence to analyse A high high medium medium value, price B medium high medium low price C low low low medium presence own medium low high high availability Of a range of analyzed companies and competitors – usually those where data is available / accessible – the areas of best practice for further in depth analysis are highlighted. The detailed benchmarking analysis is mostly resulting in a strengths and weaknesses profile.strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 33
  34. 34. IV - Tools and instruments for strategic control - externalBenchmarkingSteps towards a benchmarking analysis:There are different processes to do a benchmarking but in most cases it follows the following cycle: 1. Preparation: • Definition which aspects are to be benchmarked Preperation in which depth • Definition of benchmarking goals – what is expected outcome • Definition of benchmarking team, time frame and Conclusion Implementation resources (e.g. budget for external benchmarking) • Definition of benchmarking objects e.g. products, services, processes, organizational structures • Assessment of the own performance and Analysis positioning in respect to the benchmarking objects (creation of a reference point) • Selection of key performance indicators which describe the benchmarked performancestrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 34
  35. 35. IV - Tools and instruments for strategic control - external Benchmarking2. Implementation: • After defining the benchmarking objects the benchmarking partners need to be defined • If it is an internal benchmarking, partners can be other functional units or subsidiaries • If it is an external benchmarking partners are sector or non-sector competitors, or companies which are globally best in class in the analyzed aspects • Key is to always select companies that are better than the own organization in the benchmarked aspects • There are often sector specific benchmarking organizations, which – being a neutral third party – get access to data and information of the sector competitors. They then sell their benchmarking results to the market • If no direct data is available one has to work with publicly available data strategic controlling, Philipp Gaggl, Hanoi April 2013 PwC Slide 35
  36. 36. IV - Tools and instruments for strategic control - external Benchmarking3. Analysis: • With the benchmarked data and information it is possible to highlight areas of performance improvement • Also it is thus possible to see the gap between the own company versus the analyzed best practice • In an ideal benchmarking these aspects are shown by quantitative data points • The analysis results in a strengths and weaknesses profile comprising of the analyzed benchmarking objects • Also it is important to highlight the best practices to learn from these and if directly applicable adopt them in the own organization strategic controlling, Philipp Gaggl, Hanoi April 2013 PwC Slide 36
  37. 37. IV - Tools and instruments for strategic control - external Benchmarking4. Conclusion: • The last phase of the benchmarking process aims at implementing the learnings from the benchmarking process in the own organization • Existing processes are adapted or changed and best practice practices are implemented • It is important to communicate the reason and value of this organizational change, as often the organization and its employees are resistant to changes • A plan of implementing the changes contains of the specification of the specific activities, the sequence of implementation, the resources allocated, the time allocated, the responsibilities and the expected results • The results of the successful implementation need to be communicated as well and participating employees need to be thanked to keep the motivation for future changes Benchmarking in practice: Benchmarking is a continuous process, rather than a one off activity. Thus it should be done frequently to keep up with changes and improvements in processes and best practices. Ultimate result is the improvement of the competitive positioning. strategic controlling, Philipp Gaggl, Hanoi April 2013 PwC Slide 37
  38. 38. IV - Tools and instruments for strategic control - externalBenchmarking - examplecompany report communication memberships management key issues systemsPeer-Group Kein NB • kurzes Kapitel über NH Mitgliedschaft bei Keine Mitarbeitergesundheit,A im Geschäftsbericht respACT und dem Informationen Corporate Governance, 2009 – NH-Subsite auf Unternehmensnetz- Umgang mit Älteren, Unternehmenswebsite werk „Verantwortung Transparenz zeigen!“Peer-Group NB 2009 (A+), • Hohes Level der NH UN Global Compact, EMAS, „audit Produktverantwortung,B geprüft , Bericht Kommunikation ÖGUT, Transparency beruf und familie“ Entwicklungshilfe, seit 2006 • Verankerung in International, respACT Menschen-rechte, Geschäftsstrategie Transparenz, Diversität, • Stakeholderdialoge Gleichberechtigung, UmweltschutzPeer-Group Kein eigener NB in • NH in Geschäfts- ÖGUT, Cabernet, ÖVA, Keine Mitarbeiterzufrieden-C AUT, sondern im strategie verankert UNEP FI, ÖNORM, UN Informationen heit/ -gesundheit, Unicredit-Verbund • vielfältige Global Compact, Klimaschutz, (B+) geprüft von Informationen respACT Emissionsreduktion, Wirtschaftsprüfer auf österreichischer Diversity-Management, Website SponsoringPeer-Group CSR Report 2009 • Ausführliche Website respACT, UN Global EMAS-Einführung Transparenz,D (+CoP), nicht zum Thema NH Compact, Global geplant Sponsoring, geprüft, seit 2008 • Transparenter NHB Compact Netzwerk Produktverantwortung, Österreich Compliance, Abfall, Energieverbrauch, Menschenrechtestrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 38
  39. 39. IV - Tools and instruments for strategic control - externalBenchmarking - examplestrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 39
  40. 40. IV - Tools and instruments for strategic control - externalBenchmarking - examplestrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 40
  41. 41. IV - Tools and instruments for strategic control - externalGroup work:• Select your own or a fictional company (define goal, purpose, product and industry) to benchmark it with the peer-group and best in class.• Go through the preparation and as much as possible through the implementation phase• Think of what you want to benchmark, which data sources are available, what KPIs can measure the gap etc.strategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 41
  42. 42. End of second day Thank you for your time and interest!Philipp GAGGL | Manager, Consulting( +43-1-501 88-2834 | 7 +43-1-501 88-621 | È +43676833772834 | *philipp.gaggl@at.pwc.comPwC Österreich | Erdbergstraße 200 | 1030 Wien | www.pwc.atstrategic controlling, Philipp Gaggl, Hanoi April 2013PwC Slide 42

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