Vladimir Dzenopoljac - Strategy for my business


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Strategy for my business

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Vladimir Dzenopoljac - Strategy for my business

  1. 1. Module: STRATEGY FOR MY BUSINESS Topic of the day: Why do I need a strategy?
  2. 2. Let ’s introduce ourselves ...
  3. 3. Introduction <ul><li>Few words about the module and its connection to other modules </li></ul><ul><li>Topic of the day </li></ul><ul><li>At the end of the day we will : </li></ul><ul><ul><li>start to think strategically </li></ul></ul><ul><ul><li>know what strategy, vision, mission, objectives, strategic management stand for </li></ul></ul><ul><ul><li>define the lements of strategic planning by ourselves </li></ul></ul>
  4. 4. Thinking strategically... <ul><li>How to thonk strategically? </li></ul><ul><li>Three crucial questions: </li></ul><ul><ul><li>Where are we now? </li></ul></ul><ul><ul><li>Where do we want to be? </li></ul></ul><ul><ul><ul><li>What business do we want to be in? </li></ul></ul></ul><ul><ul><ul><li>Who our customers will be? </li></ul></ul></ul><ul><ul><ul><li>What results are we striving for? </li></ul></ul></ul><ul><ul><li>How do we get there? </li></ul></ul>
  5. 5. Team work <ul><li>Assignment: </li></ul><ul><ul><li>Let ’s spli in teams </li></ul></ul><ul><ul><li>Choose a company : </li></ul></ul><ul><ul><ul><li>A participant’s business </li></ul></ul></ul><ul><ul><ul><li>Any existing enterprise </li></ul></ul></ul><ul><ul><ul><li>An imagenary enterprise </li></ul></ul></ul><ul><ul><li>All the teams mus agree on choice above </li></ul></ul><ul><ul><li>We shall work on a strategy for the chosen enterprises all the way till the end of the module ! </li></ul></ul>
  6. 6. Let’s practice strategic thinking ... <ul><li>Gropu assignment : </li></ul><ul><ul><li>Answer the following questions regarding your company : </li></ul></ul><ul><ul><ul><li>Where are we now? </li></ul></ul></ul><ul><ul><ul><li>Where do we want to be? </li></ul></ul></ul><ul><ul><ul><ul><li>What business do we want to be in? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Who our customers will be? </li></ul></ul></ul></ul><ul><ul><ul><ul><li>What results are we striving for? </li></ul></ul></ul></ul><ul><ul><ul><li>How do we get there? </li></ul></ul></ul>
  7. 7. Strategic thinking ... <ul><li>Business approaches : </li></ul><ul><ul><li>Inactivists </li></ul></ul><ul><ul><li>Rea c tivist s </li></ul></ul><ul><ul><li>Prea c tivist s </li></ul></ul><ul><ul><li>Intera c tivist s </li></ul></ul>
  8. 8. Strategic thinking ... <ul><li>Businessmen categories ( attitude towards the change ): </li></ul><ul><ul><li>Those who try to make things happen </li></ul></ul><ul><ul><li>Those who observe what is happening </li></ul></ul><ul><ul><li>Those who wonder what happened </li></ul></ul><ul><li>You choose which category you will be in !!! </li></ul>
  9. 9. Strateg y !? <ul><li>What is a strategy ? </li></ul><ul><li>Strateg y = a way of achieving the objectives </li></ul><ul><li>The enterprises have same or similar objectives, only the strategies differ </li></ul><ul><li>“ The strategy isn’t everything, but without a strategy everything is nothing ” </li></ul>
  10. 10. Why do I need a strategy ? <ul><li>The strategy proactively shapes the conducting of a business </li></ul><ul><li>The purpose of a strategy is to mold independent decisions of managers in order to attain objectives </li></ul><ul><li>Which strategy is the best ? </li></ul><ul><li>There isn’t the best strategy, there is only its lasting logic ! </li></ul>
  11. 11. Strategic management <ul><li>Strategic management – a managerial paradigm </li></ul><ul><li>Connects environmental opportunities and threats with strenghts and weaknesses of a company </li></ul><ul><li>Planning is everything, the plan is nothing ! </li></ul><ul><li>Do not be affraid of vocabulary, embrace the logic </li></ul>
  12. 12. The tasks of strategic management
  13. 13. Defining vision and mission <ul><li>VISION </li></ul><ul><ul><li>The basic benchmark ( core values ) in management of a comapny </li></ul></ul><ul><ul><li>Inspiration , seeing the invisible , northern star </li></ul></ul><ul><ul><li>Should be present and understandable </li></ul></ul><ul><ul><li>Where are we going ? </li></ul></ul><ul><ul><li>What are our business ambitions in the future ? </li></ul></ul><ul><ul><li>Gives an identity to the company </li></ul></ul><ul><li>The vision defines : </li></ul><ul><ul><li>The product , the market and technology in the future </li></ul></ul><ul><ul><li>Geographical and product market </li></ul></ul><ul><ul><li>Core competencies the will be developed </li></ul></ul><ul><ul><li>“ The look ” of a comany in the future </li></ul></ul>
  14. 14. Defining vision and mission <ul><li>MISSION STATEMENT </li></ul><ul><ul><li>More concrete , a basis for setting goals and choosing a strategy </li></ul></ul><ul><ul><li>THE PURPOSE OF COMPANY’S EXISTENCE ! </li></ul></ul><ul><ul><li>A nission statement should : </li></ul></ul><ul><ul><ul><li>express stakeholders’ interests in an interesting way </li></ul></ul></ul><ul><ul><ul><li>be inspiring </li></ul></ul></ul><ul><ul><ul><li>be understandable </li></ul></ul></ul><ul><ul><li>A mission statement separates us from our competitors </li></ul></ul><ul><li>How do we formulate a mission statement in three steps : </li></ul><ul><ul><li>involve as many people as you can </li></ul></ul><ul><ul><li>ask everyone to describe the company in a one word sentence and write it ona board </li></ul></ul><ul><ul><li>when the words run out, uste the ones that suits you the best and combine them </li></ul></ul>
  15. 15. Vision vs. mission VISION MISSION A strategic vision concerns a firm’s future business path - “where we are going” A mission statement focuses on current business activities - “who we are and what we do” <ul><ul><li>Markets to be pursued </li></ul></ul><ul><ul><li>Current product and service offerings </li></ul></ul><ul><ul><li>Future technology-product-customer focus </li></ul></ul><ul><ul><li>Customer needs being served </li></ul></ul><ul><ul><li>Kind of company that management is trying to create </li></ul></ul><ul><ul><li>Technological and business capabilities </li></ul></ul>
  16. 16. Our vision : Getting to a billion connected computers worldwide, millions of servers, and trillions of dollars of e-commerce. Intel’s core mission is being the building block supplier to the Internet economy and spurring efforts to make the Internet more useful. Being connected is now at the center of people’s computing experience. We are helping to expand the capabilities of the PC platform and the Internet.
  17. 17. Mission statement : We intend to give our customers high quality, delicious and nutritious products every day, and to help them lead healthy, active, pleasant and long life . Vision : Transformation in a company with strong and acknowledged regional brands, which will be pushed forward by the needs and desires of customers : quality food, health and welfare .
  18. 18. VIZIJA Our vision is to create a permanent competitive advantage on the market offering our insureds, collaborators and business partners the value of products, services and business relations overshadowing those of others. We are building a successful and secure business future for us and all our associates and collaborators. MISIJA Our mission is to offer the top quality and high level of services tailor- made for our clients. We seek to increase and preserve the number of the clients who will acknowledge our focus on service quality and recognize our approach to value added business. We do our best to provide our clients with the top quality insurance under the most favourable conditions. We are looking to establish a long-term and successful business relations with our clients built around a wide range of our services. In our business policy, the state-of-the-art information technology and fast and flexible communication in all business segments is a must. To ensure continual provision of the best quality services we introduce the most up-to-date business standards, specialized departments, and work procedures. Our staff is comprised of highly skilled and qualified professionals who observe the utmost standards of business code of ethics and are capable of performing the most delicate tasks the insurance market calls for.
  19. 19. Mission statement “Štark” – regional leader in candies and snacks industry – a synonym for sweet in every family. Vision Satisfying the needs of consumers, employees andd the society in whole. With the respect to standards of food quality and safety, we are expanding our product lines by using the contemporary technology and knowledge. Our relationships with the business partners are based on the mutual trust and respect. We create friendly and open relationship with our employees, bearing in mind their needs and expectations. In this manner we ensure their satisfaction and identification with the company. We encourage team work because we believe that that is the way of encouraging everyone’s professional contribution to the company’s success. Respecting the ethical principles, we actively participate in projects which aim to improve the quality of life in communities that we conduct our business.
  20. 20. Mission statement Through the excellent consulting, development, education and support during and after the information systems introduction, we aim to help our customers to achieve competitive advantage . Vision To become the leading SAP consulting agency in the region .
  21. 21. The tasks of strategic management
  22. 22. Setting goals <ul><li>Concrete results that we want to achieve </li></ul><ul><li>Objectives represent the basis for tracking the results achievement </li></ul><ul><li>Objectives push the firm towards invention and focus on results </li></ul><ul><li>Objective do not let you relax and become worse in business </li></ul>
  23. 23. Types of objectives <ul><li>Financial objectives </li></ul><ul><ul><li>Outcomes focused on improving financial performance </li></ul></ul><ul><li>Strategic objectives </li></ul><ul><ul><li>Outcomes focused on improving long-term, competitive business position </li></ul></ul>
  24. 24. Types of objectives <ul><li>Objectives should be SMART: </li></ul><ul><ul><li>S pecific </li></ul></ul><ul><ul><li>M easurable </li></ul></ul><ul><ul><li>A ttainable </li></ul></ul><ul><ul><li>R ealistic </li></ul></ul><ul><ul><li>T ime-bound </li></ul></ul>
  25. 25. Examples of Financial Objectives <ul><li>Boost annual return on investment from 15% to 20% within three years </li></ul><ul><li>Maintain a positive cash flow every year </li></ul><ul><li>Grow net profit 10% annually </li></ul><ul><li>15% overall costs reduction in the next year </li></ul>
  26. 26. Examples of Strategic Objectives <ul><li>Increase firm’s market share </li></ul><ul><li>Overtake key rivals on quality or customer service or product performance </li></ul><ul><li>Boost firm’s reputation with customers </li></ul><ul><li>Achieve technological superiority </li></ul><ul><li>Become leader in new product introductions </li></ul>
  27. 27. Group assignment <ul><li>Questionnaires : </li></ul><ul><ul><li>Formulate company’s vision </li></ul></ul><ul><ul><li>Formulate company’s mission statement </li></ul></ul><ul><ul><li>Set the business objectives : </li></ul></ul><ul><ul><ul><li>Keep in mind vision and mission </li></ul></ul></ul><ul><ul><ul><li>What are your strategic objectives ? </li></ul></ul></ul><ul><ul><ul><li>What are your financial objectives ? </li></ul></ul></ul><ul><ul><ul><li>SMART </li></ul></ul></ul>
  28. 28. The tasks of strategic management
  29. 29. The Hows That Define a Firm's Strategy <ul><li>How to grow the business </li></ul><ul><li>How to please customers </li></ul><ul><li>How to outcompete rivals </li></ul><ul><li>How to respond to changing market conditions </li></ul><ul><li>How to manage each functional piece of the business and develop needed organizational capabilities </li></ul><ul><li>How to achieve strategic and financial objectives </li></ul>
  30. 30. Why Do Strategies Evolve? <ul><li>There is always an ongoing need to react to </li></ul><ul><ul><li>Shifting market conditions </li></ul></ul><ul><ul><li>Fresh moves of competitors </li></ul></ul><ul><ul><li>New technologies </li></ul></ul><ul><ul><li>Evolving customer preferences </li></ul></ul><ul><ul><li>Political and regulatory changes </li></ul></ul><ul><ul><li>New windows of opportunity </li></ul></ul><ul><ul><li>Crisis situations </li></ul></ul>
  31. 31. The tasks of strategic management
  32. 32. Strategy implementation and control and revision <ul><li>We will discuss this last day of the module </li></ul>
  33. 33. <ul><li>Strategic management process </li></ul>
  34. 34. Environment Resources Expectations and purpose Strategic changes management Resource allocation, control Organizational structure Strategy evaluation and choice Strategic options Basics of strategic choice
  35. 35. Thank you for the attention ! Questions ?
  36. 36. Module: STRATEG Y FOR MY BUSINESS Topic of the day : What should I know about my business environment ?
  37. 37. Why do we need analysis ?
  38. 38. Why do we need analysis ? <ul><li>“ Analysis is the critical starting point of strategic thinking. ” </li></ul><ul><li>Kenichi Ohmae </li></ul>
  39. 39. Why do we need analysis ?
  40. 40. Why do we need analysis ? <ul><li>Situational analysis – strategic management starting point </li></ul><ul><li>Situational analysis – analysis of external and internal factors, evaluation of the starting business point </li></ul><ul><li>Situational analysis helps the company to : </li></ul><ul><ul><li>exploit opportunities </li></ul></ul><ul><ul><li>avoid and minimize the risk </li></ul></ul><ul><ul><li>keep existing and to obtain new capabilities </li></ul></ul><ul><ul><li>minimize or remove the company’s weaknesses </li></ul></ul>
  41. 41. Why do we need analysis ? <ul><li>What is situational analysis ? </li></ul><ul><ul><li>Two important aspects : </li></ul></ul><ul><ul><li>External or macro environment </li></ul></ul><ul><ul><li>Internal or micro environment </li></ul></ul>
  42. 42. Business environment components
  43. 43. General environment <ul><li>General environment analysis : </li></ul><ul><ul><li>PEST analysis </li></ul></ul><ul><ul><li>Opportunities and threats matrix </li></ul></ul><ul><ul><li>SWOT analysis </li></ul></ul>
  44. 44. PEST analysis <ul><li>POLITI CAL / LEGAL FACTORS </li></ul><ul><li>Antimonopol y legislation </li></ul><ul><li>Natural environment protection laws </li></ul><ul><li>Tax policy </li></ul><ul><li>Foreign exchange regulations </li></ul><ul><li>Government stability </li></ul><ul><li>ECONOMIC FACTORS </li></ul><ul><li>Economy cycles </li></ul><ul><li>GDP trends </li></ul><ul><li>Interest rates </li></ul><ul><li>Capital supply </li></ul><ul><li>Inflation </li></ul><ul><li>Unemployment </li></ul><ul><li>Buying power </li></ul><ul><li>Availability of resources and costs </li></ul><ul><li>SOCIO-CULTURAL FACTORS </li></ul><ul><li>Demography </li></ul><ul><li>Revenue distribution </li></ul><ul><li>Social mobility </li></ul><ul><li>Lifestyle changes </li></ul><ul><li>Attitude towards working and leisure </li></ul><ul><li>Consumerism </li></ul><ul><li>Levels of education </li></ul><ul><li>TECHNOLOGICAL FACTORS </li></ul><ul><li>State’s investment in R&D </li></ul><ul><li>State’s and industry’s pursuing the new technologies </li></ul><ul><li>New discoveries, development </li></ul><ul><li>Transfer of technology tempo </li></ul><ul><li>Technology aging tempo </li></ul>
  45. 45. <ul><li>Forms by the two matrices : </li></ul><ul><ul><li>Threats matrix </li></ul></ul><ul><ul><li>Opportunity matrix </li></ul></ul><ul><li>Threat – challenges from inadequate trends, disturbances in the environment, which could lead (without marketing intervention) to stagnation of the product or brand (Kotler) – EVERYTHING THAT MIGHT HAVE NEGATIVE IMPACT ON OUR BUSINESS ! </li></ul><ul><li>Opportunity – attractive arena of certain marketing actions within which, the company will probably succeed to achieve superior competitive advantage (Kotler) – EVERYTHING THAT MIGHT ENABLE US TO SUCCEED IN BUSINESS ! </li></ul>Opportunities and threats matrix
  46. 46. Probability of occurrence The scope of threats Threats matrix High Low High Low
  47. 47. Probability of success Potential attractiveness Opportunity matrix High Low High Low
  48. 48. New matrix – Opportunities and threats matrix Level of threats Level of opportunities Suspicious position Mature company Ideal position Difficult position Low High High Low
  49. 49. <ul><li>Successful manager exploits the opportunities, rather then just solving the problems ! </li></ul><ul><li>We must put together external analysis with our internal strengths ! </li></ul><ul><li>S trenghts </li></ul><ul><li>W eaknesses </li></ul><ul><li>O pportunities </li></ul><ul><li>T hreats </li></ul>SWOT analysis
  50. 50. <ul><li>Opportunities – favorable influence of PEST and competitive factors </li></ul><ul><li>Pretnje - unfavorable influence of PEST and competitive factors </li></ul><ul><li>Strengths and weaknesses – resources of the company and their analysis ( Value chain , core competence ) </li></ul>SWOT analysis
  51. 51. SWOT analysis MA X I - MA X I MINI - MA X I MA X I - MINI MA X I - MINI Internal factors Eksterni faktori Strengths Weaknesses Opportunities Threats
  52. 52. Business environment components
  53. 53. About competition in general <ul><li>Competition – separates successful from the others </li></ul><ul><li>Competitive battle takes place within the industry </li></ul><ul><li>Who are our competitors ? </li></ul><ul><ul><li>only the companies from our industry </li></ul></ul><ul><ul><li>partners, other industries , substitutes </li></ul></ul><ul><li>The most dangerous competitor is the one that hasn’t appeared yet! </li></ul>
  54. 54. Industry competition <ul><li>Industry – a group of companies which produce the similar products </li></ul><ul><li>The elements of an industry : </li></ul><ul><ul><li>competitors </li></ul></ul><ul><ul><li>technology </li></ul></ul><ul><ul><li>products </li></ul></ul><ul><ul><li>customers </li></ul></ul><ul><li>The industry – a group of companies which uses specific technology for production of similar or related products, which are sold to certain customers . </li></ul>
  56. 56. COMPETITIVE RIVALRY <ul><li>Active jockeying for position among rivals and frequent launches of new offensives to gain sales and market share </li></ul><ul><li>Lots of firms that are relatively equal in size and capability </li></ul><ul><li>Slow market growth </li></ul><ul><li>Industry conditions tempt some firms to go on the offensive to boost volume and market share </li></ul><ul><li>Customers have low costs in switching to rival brands </li></ul><ul><li>A successful strategic move carries a big payoff </li></ul><ul><li>Costs more to get out of business than to stay in </li></ul><ul><li>Firms have diverse strategies, corporate priorities, resources, and countries of origin </li></ul>
  57. 57. Competitive Force of Suppliers <ul><li>Suppliers are a strong competitive force when: </li></ul><ul><ul><li>Item makes up large portion of product costs, is crucial to production process, and/or significantly affects product quality </li></ul></ul><ul><ul><li>It is costly for buyers to switch suppliers </li></ul></ul><ul><ul><li>They have good reputations and growing demand </li></ul></ul><ul><ul><li>They can supply a component cheaper than industry members can make it themselves </li></ul></ul><ul><ul><li>They do not have to contend with substitutes </li></ul></ul><ul><ul><li>Buying firms are not important customers </li></ul></ul>
  58. 58. Competitive Force of Buyers <ul><li>Buyers are a strong competitive force when: </li></ul><ul><ul><li>They are large and purchase a sizable percentage of industry’s product </li></ul></ul><ul><ul><li>They buy in large quantities </li></ul></ul><ul><ul><li>They can integrate backward </li></ul></ul><ul><ul><li>Industry’s product is standardized </li></ul></ul><ul><ul><li>Their costs in switching to substitutes or other brands are low </li></ul></ul><ul><ul><li>They can purchase from several sellers </li></ul></ul><ul><ul><li>Product purchased does not save buyer money </li></ul></ul>
  59. 59. Barriers to Entry <ul><li>Sizable economies of scale </li></ul><ul><li>Inability to gain access to specialized technology </li></ul><ul><li>Existence of strong learning/experience curve effects </li></ul><ul><li>Strong brand preferences and customer loyalty </li></ul><ul><li>Large capital requirements and/or other specialized resource requirements </li></ul><ul><li>Cost disadvantages independent of size </li></ul><ul><li>Difficulties in gaining access to distribution channels </li></ul><ul><li>Regulatory policies, tariffs, trade restrictions </li></ul>
  60. 60. Substitute Products <ul><li>Substitutes: </li></ul><ul><ul><li>Satisfy similar need in a different way </li></ul></ul><ul><ul><li>Other industries’ products </li></ul></ul><ul><li>How to Tell Whether Substitute Products are a Strong Force : </li></ul><ul><ul><li>Sales of substitutes are growing rapidly </li></ul></ul><ul><ul><li>Producers of substitutes plan to add new capacity </li></ul></ul><ul><ul><li>Profits of producers of substitutes are up </li></ul></ul><ul><li>Examples </li></ul>
  61. 61. More techniques in competitive environment analysis <ul><li>Experience curve </li></ul><ul><li>Portfolio model s </li></ul><ul><li>B enchmarking </li></ul>
  62. 62. Business environment components
  63. 63. Internal analysis <ul><li>Comparative advantage </li></ul><ul><li>Competitive advantage </li></ul><ul><li>Sources of competitive advantage : </li></ul><ul><ul><li>Cost leadership </li></ul></ul><ul><ul><li>Differentiation </li></ul></ul><ul><li>When and how can we realize competitive advantage ? </li></ul><ul><li>Importance of evaluation of our strengths and weaknesses </li></ul><ul><li>Types of resources : </li></ul><ul><ul><li>Tangible </li></ul></ul><ul><ul><li>Intangible </li></ul></ul>
  64. 64. The Four Criteria of Sustainable Competitive Advantage <ul><li>Valuable Capabilities </li></ul><ul><ul><li>Help a firm neutralize threats or exploit opportunities </li></ul></ul><ul><li>Rare Capabilities </li></ul><ul><ul><li>Are not possessed by many others </li></ul></ul><ul><li>Costly-to-Imitate Capabilities </li></ul><ul><ul><li>Historical: A unique and a valuable organizational culture or brand name </li></ul></ul><ul><ul><li>Ambiguous cause: The causes and uses of a competence are unclear </li></ul></ul><ul><ul><li>Social complexity: Interpersonal relationships, trust, and friendship among managers, suppliers, and customers </li></ul></ul><ul><li>No substitutable Capabilities </li></ul><ul><ul><li>No strategic equivalent </li></ul></ul>
  65. 65. Value chain <ul><li>Chain of reproduction : </li></ul><ul><li>input – production – marketing – distribution </li></ul><ul><li>Primary expertise zone – a source of key competence of every company </li></ul><ul><li>Activities – element of value chain </li></ul>
  66. 66. Value chain Input logistics Operations Output logistics Marketing and sales Services after the sale Company infrastructure Human resources management Technology development Procurement
  67. 67. Value chain
  68. 68. Self evaluation <ul><li>Core competencies, along with the market position and product, make the most important source of competitive advantage </li></ul><ul><li>Strategy is defines by the analysis of general, competitive and internal analysis ! </li></ul><ul><li>Recommendation : </li></ul><ul><ul><li>Embrace the knowledge </li></ul></ul><ul><ul><li>Develop core competencies according to the market needs </li></ul></ul><ul><ul><li>Use your resources </li></ul></ul><ul><ul><li>Motivate employees to participate </li></ul></ul><ul><ul><li>Give employees more authority </li></ul></ul><ul><ul><li>Make short deadlines </li></ul></ul><ul><ul><li>make the quality data base </li></ul></ul>
  69. 69. Assignment <ul><li>Business environment analysis </li></ul><ul><ul><li>PEST analysis </li></ul></ul><ul><ul><li>SWOT analysis </li></ul></ul><ul><ul><li>5 competitive forces </li></ul></ul><ul><ul><li>Value chain </li></ul></ul>
  70. 70. Thank you for your attention !
  71. 71. Module: STRATEG Y FOR MY BUSINESS Topic of the day : How do I formulate the strategy for my own business ? First steps ...
  72. 72. Let’s repeat ... <ul><li>What is the strategy and why do I need it ? </li></ul><ul><li>Three important questions of strategic thinking </li></ul><ul><li>Four business approaches ... </li></ul><ul><li>What are the main tasks of strategic management ? </li></ul><ul><li>Define vision, mission and objectives ? </li></ul><ul><li>Strategic management process </li></ul>
  73. 73. Overview of business strategies <ul><li>EXISTING BUSINESS STRATEGIES </li></ul><ul><li>Generic strategies </li></ul><ul><ul><li>Cost leadership </li></ul></ul><ul><ul><li>Differentiation </li></ul></ul><ul><ul><li>Fo c us </li></ul></ul><ul><li>Stable growth strategies </li></ul><ul><ul><li>Step-by-step growth </li></ul></ul><ul><ul><li>Harvesting strategy </li></ul></ul><ul><ul><li>Sustainable growth </li></ul></ul><ul><li>Intensive growth strategies </li></ul><ul><ul><li>Market penetration </li></ul></ul><ul><ul><li>Expanding of market </li></ul></ul><ul><ul><li>Product development </li></ul></ul><ul><li>Diversification </li></ul><ul><ul><li>Concentric diversification </li></ul></ul><ul><ul><li>Conglomerate diversification </li></ul></ul><ul><li>ENTREPRENEURIAL STRATEGIES </li></ul><ul><li>“ Fastest with the mostest” </li></ul><ul><li>“ Hit them where they ain’t” </li></ul><ul><li>Ecological niches </li></ul><ul><li>Changing values and characteristics </li></ul><ul><li>SMALL BUSINESS STRATEGIES </li></ul><ul><li>New venture strategy </li></ul><ul><li>Survival strategy </li></ul><ul><li>Growth strategy </li></ul>etc ...
  74. 74. Important topics in formulating strategy <ul><li>Growth method </li></ul><ul><ul><li>Organic </li></ul></ul><ul><ul><li>Mergers & acquisitions </li></ul></ul><ul><ul><li>Strategic alliances </li></ul></ul><ul><li>Growth tempo </li></ul><ul><ul><li>When to attack the new market ? </li></ul></ul><ul><ul><li>Leader strategies </li></ul></ul><ul><ul><li>Follower strategies </li></ul></ul><ul><li>Investments </li></ul><ul><li>Financing the growth </li></ul>
  75. 75. Small business growth stages
  76. 76. Stage I - Existence <ul><li>Main problems : </li></ul><ul><ul><li>Obtaining customers </li></ul></ul><ul><ul><li>Delivering the product or service contracted for </li></ul></ul><ul><li>Key questions : </li></ul><ul><ul><li>Can we get enough customers, deliver our products and provide services well enough to become viable business ? </li></ul></ul><ul><ul><li>Can we expand from that one key customer to a much broader sales base ? </li></ul></ul><ul><ul><li>Do we have enough money to cover the considerable cash demands of this start-up phase ? </li></ul></ul><ul><li>The owner does everything ! </li></ul><ul><li>The strategy – to exist! </li></ul><ul><li>The ones that succeed move on to the next stage </li></ul>
  77. 77. Stage II - Survival <ul><li>The business has demonstrated that it is workable entity </li></ul><ul><li>There is a sufficient satisfied customers base </li></ul><ul><li>Main problems : </li></ul><ul><ul><li>In short term, can we generate enough cash to break even and to cover the repair or replacement of our capital assets as they wear out ? </li></ul></ul><ul><ul><li>Can we, at the minimum, generate enough cash flow to stay in business ? </li></ul></ul><ul><li>Small number of employees ( some managers ) </li></ul><ul><li>The firm can either move to next stage or stay in this one and eventually go out of business </li></ul><ul><li>“ Mom and pop” stores </li></ul>
  78. 78. Stage III - Success <ul><li>The business has grown ( more complicated organizational structure – func t ional ) </li></ul><ul><li>Two possible outcomes : </li></ul><ul><ul><li>Success-Disengagement sub stage </li></ul></ul><ul><ul><li>Success-Growth sub stage </li></ul></ul>
  79. 79. Stage IV – Take off <ul><li>Main issues : </li></ul><ul><ul><li>How can we grow rapidly ? – Delegation </li></ul></ul><ul><ul><li>How can we finance our growth ? – Cash </li></ul></ul><ul><li>Delegation : </li></ul><ul><ul><li>Delegate responsibility to others, control the performance – actual delegation </li></ul></ul><ul><ul><li>Formally delegate, informally still holding everything in control </li></ul></ul><ul><ul><li>Total exclusion from the business – abdication </li></ul></ul><ul><li>Cash : </li></ul><ul><ul><li>Will there be enough cash flow to satisfy great demands that growth brings ? </li></ul></ul><ul><ul><li>Will cash flow be eroded by ill-advised investments and inadequate expenses ? </li></ul></ul><ul><li>The organization is decentralized and somewhere divisional </li></ul><ul><li>Strategic and operational planning </li></ul><ul><li>Competent managers </li></ul><ul><li>The owner is separated from management, preferably </li></ul><ul><li>We can grow even more, or we can go back to some previous stages </li></ul>
  80. 80. Stage V – Resource maturity <ul><li>Priorities : </li></ul><ul><ul><li>To consolidate and control the financial gains </li></ul></ul><ul><ul><li>To keep the advantages of small business ( flexibility, entrepreneurial spirit ) </li></ul></ul><ul><ul><li>To prevent inefficiencies that growth may bring </li></ul></ul><ul><li>There is enough resources to adequately plan, at strategic and operational level </li></ul><ul><li>Management is decentralized, experienced and well educated </li></ul><ul><li>The enterprise is large, has significant resource base – if succeed in keeping entrepreneurial spirit, it can become a serious player on the market ! </li></ul>
  81. 81. CRAFTING A STRATEGY Vision, mission, objectives General environment analysis PEST Self-evaluation “ Value chain ” External environment analysis Competition analysis “ 5 forces ” Sources of competitive advantage Benchmarking STRATEGY
  82. 82. Should I charge my work cheaply or expensively ? <ul><li>Competitive advantage ? </li></ul><ul><li>Two sources of competitive advantage : </li></ul><ul><ul><li>low costs </li></ul></ul><ul><ul><li>differentiation </li></ul></ul>
  83. 83. Cost leadership strategy <ul><li>Costs – very important factor </li></ul><ul><li>Competitors have different types and amounts of costs </li></ul><ul><li>Value chain relation </li></ul><ul><li>Every activity has costs </li></ul><ul><li>Cost leadership is achieved if the total costs in our value chain are lower that the ones that our rivals posses </li></ul>
  84. 84. Differentiation strategy <ul><li>Differentiation ? </li></ul><ul><li>Increasing added value to final product </li></ul><ul><li>The customers see you differently </li></ul><ul><li>Basis of differentiation: </li></ul><ul><ul><li>product characteristics </li></ul></ul><ul><ul><li>relationships between business functional areas </li></ul></ul><ul><ul><li>timing </li></ul></ul><ul><ul><li>location </li></ul></ul><ul><ul><li>production program </li></ul></ul><ul><ul><li>relationships with other enterprises </li></ul></ul><ul><ul><li>reputation </li></ul></ul>
  85. 85. Focus strategies <ul><li>One niche is in focus </li></ul><ul><li>We can focus on low costs </li></ul><ul><li>Or on differentiation </li></ul><ul><li>Parallel implementation of both strategies ? </li></ul>
  86. 86. Growth method <ul><li>Organic – with our own strength </li></ul><ul><ul><li>investments in new capacities </li></ul></ul><ul><ul><li>investments in existing capacities expansion </li></ul></ul><ul><ul><li>entering the new areas </li></ul></ul><ul><li>External method – M&A </li></ul><ul><ul><li>A cquisition – “ A ” + “ B ” = Mother comapny “ A ” + daughter company “ B ” purchase of more than 50% of shares </li></ul></ul><ul><ul><li>M erger ) – “ A ” + “ B ” = “ A ”, the target seizes to exists </li></ul></ul><ul><li>Strategic alliances – combined method </li></ul><ul><ul><li>Examples : joint ventures , licensing , franchising , supply contracts , distribution contracts ... </li></ul></ul>
  87. 87. Growth tempo <ul><li>“ It’s not that the big ones eat the small ones, but the fast ones eat the slow ones ” </li></ul><ul><li>Tempo of growing – the speed of introducing changes </li></ul><ul><li>New markets entry timing </li></ul><ul><li>Corresponding strategies : </li></ul><ul><ul><li>pioneering strategy </li></ul></ul><ul><ul><li>strategy of an early follower </li></ul></ul><ul><ul><li>strategy of the late follower </li></ul></ul>
  88. 88. More strategies ... <ul><li>Stable growth strategies </li></ul><ul><ul><li>Step-by-step growth </li></ul></ul><ul><ul><li>Harvesting strategy </li></ul></ul><ul><ul><li>Sustainable growth </li></ul></ul><ul><li>Intensive growth strategies </li></ul><ul><ul><li>Market penetration </li></ul></ul><ul><ul><li>Market development </li></ul></ul><ul><ul><li>Product development </li></ul></ul><ul><li>Diversification </li></ul><ul><ul><li>Concentric diversification </li></ul></ul><ul><ul><li>Conglomerate diversification </li></ul></ul>
  89. 89. Stable growth strategies <ul><li>“ S tatus quo-a”, “ do not do anything ” </li></ul><ul><li>Successful firms in growing markets </li></ul><ul><li>Useful in predictable environment </li></ul><ul><li>For small business owners in a market segment </li></ul><ul><li>Step-by-step growth </li></ul><ul><li>The same or similar objectives </li></ul><ul><li>Objectives realization increasing every year in same percentage </li></ul><ul><li>The same or similar products </li></ul><ul><li>Management do not strive for change </li></ul><ul><li>It is dangerous not to do anything when the market demands changes ! </li></ul><ul><li>Sustainable growth </li></ul><ul><li>Slow growth, precaution </li></ul><ul><li>Numerous threats and restrictions to growth </li></ul><ul><li>Balanced growth with opportunities – bal o on! </li></ul><ul><li>Pause strategy </li></ul><ul><li>Harvest </li></ul><ul><li>Profit strategy </li></ul><ul><li>There are profitable products </li></ul><ul><li>In short term maintain positive cash flow with cutting investments and costs </li></ul><ul><li>Selling a product line </li></ul><ul><li>Useful when a company needs to overcome temporary difficulties </li></ul>
  90. 90. Intensive growth strategies <ul><li>Possibilities for growth in existing industry : </li></ul><ul><ul><li>Production lines gap </li></ul></ul><ul><ul><ul><li>fulfilling existing product lines </li></ul></ul></ul><ul><ul><ul><li>introduction of new production lines </li></ul></ul></ul><ul><ul><li>Distribution gap </li></ul></ul><ul><ul><ul><li>better geographical market coverage </li></ul></ul></ul><ul><ul><ul><li>increase in the number of points of sale in a gepographical area </li></ul></ul></ul><ul><ul><ul><li>imrpoving sale on certain points of sale </li></ul></ul></ul><ul><ul><li>Consumer gap </li></ul></ul><ul><ul><ul><li>attraction of non -users </li></ul></ul></ul><ul><ul><ul><li>usage for greater number of purposes </li></ul></ul></ul><ul><ul><ul><li>more intensive usage of a product </li></ul></ul></ul><ul><ul><li>Competitive gap </li></ul></ul><ul><ul><ul><li>substitutes introduction </li></ul></ul></ul><ul><ul><ul><li>direct confrontation with competitors </li></ul></ul></ul><ul><ul><ul><li>defense of current market position </li></ul></ul></ul>
  91. 91. Intensive growth strategies <ul><li>Market penetration </li></ul><ul><li>Increasing the sale of existing products on existing markets </li></ul><ul><li>More intensive marketing efforts – increase in a market share of existing products </li></ul><ul><li>Pricing policy, promotion and distribution – important elements of this strategy </li></ul><ul><li>Market development </li></ul><ul><li>Increasing the sale of existing products on new markets </li></ul><ul><li>Geographical market expansion </li></ul><ul><li>Finding new market segments on current geographical area </li></ul><ul><li>Product changes are cosmetical </li></ul><ul><li>Promotion and distribution – important elements </li></ul><ul><li>Product development </li></ul><ul><li>Increasing the sale of improved products on existing markets </li></ul><ul><li>Extending the life cycle of certain products </li></ul><ul><li>Existing distribution channels support is vital </li></ul><ul><li>To attract the customers with their positive experience with previous version of the product </li></ul>
  92. 92. Diversification <ul><li>New product + new market </li></ul><ul><li>When we run out of opportunities to grow in existing industry </li></ul><ul><li>Types of diversification : </li></ul><ul><ul><li>Concentric diversification </li></ul></ul><ul><ul><ul><li>horizontal </li></ul></ul></ul><ul><ul><ul><li>verti c al </li></ul></ul></ul><ul><ul><li>Conglomerate diversification </li></ul></ul>
  93. 93. Assignment : Do we have a preliminary strategy? <ul><li>There isn’t the best strategy, there is a logic of it that lasts ! </li></ul><ul><li>Combine the strategies </li></ul><ul><li>Take into account your competitive advantage </li></ul>
  94. 94. Thank you for your attention ! Questions?
  95. 95. Modul e : STRATEG Y FOR MY BUSINESS Topic of the day : How do I formulate the strategy for my business ? Beyond ...
  96. 96. Let’s repeat ... <ul><li>Remember some of the strategies ... </li></ul><ul><li>Which strategy suits your business the best and why ? </li></ul><ul><li>What is enterprise growth and is it always a good thing ? </li></ul><ul><li>What is growth method ? </li></ul><ul><li>What is growth tempo ? </li></ul><ul><li>Which strategy did you choose for the example you have been working on ? </li></ul>
  97. 97. Advantages and disadvantages of certain strategies <ul><li>Let’s point out the advantages and disadvantages of certain strategies together : </li></ul><ul><ul><li>generic strategies </li></ul></ul><ul><ul><li>stable growth strategies </li></ul></ul><ul><ul><li>intensive growth strategies </li></ul></ul><ul><ul><li>diversification </li></ul></ul><ul><ul><li>organic growth </li></ul></ul><ul><ul><li>mergers & acquisitions </li></ul></ul><ul><ul><li>strategic alliances </li></ul></ul><ul><ul><li>leader strategies </li></ul></ul><ul><ul><li>follower strategies </li></ul></ul>
  98. 98. Investments and business growth <ul><li>Simple and extended production </li></ul><ul><li>Investments – prerequisite for survival, growth, development, sustaining and improving competitive position </li></ul><ul><li>Selected strategy is the basis for investment planning </li></ul><ul><li>Elements of investing : </li></ul><ul><ul><li>investor </li></ul></ul><ul><ul><li>investment project </li></ul></ul><ul><ul><li>interest rate </li></ul></ul><ul><ul><li>discount rate </li></ul></ul>
  99. 99. Investments and business growth <ul><li>Types of investing : </li></ul><ul><ul><li>objects , </li></ul></ul><ul><ul><li>equipment , </li></ul></ul><ul><ul><li>land , </li></ul></ul><ul><ul><li>shares, bonds ... </li></ul></ul><ul><li>Dimensions of investing : </li></ul><ul><ul><li>the desired investment effect </li></ul></ul><ul><ul><li>competitors reaction </li></ul></ul><ul><ul><li>type of investing </li></ul></ul><ul><ul><li>attitude towards technological changes </li></ul></ul><ul><ul><li>strategic impact </li></ul></ul>
  100. 100. Investments and business growth <ul><li>Maximizing the difference between investment and effects </li></ul><ul><li>Cash flow projections </li></ul><ul><li>Time value of money </li></ul><ul><li>Methods for investment analysis : </li></ul><ul><ul><li>static : </li></ul></ul><ul><ul><ul><li>period of return </li></ul></ul></ul><ul><ul><li>dynamic : </li></ul></ul><ul><ul><ul><li>net present value </li></ul></ul></ul><ul><ul><ul><li>internal rate of return </li></ul></ul></ul><ul><li>Risk and investment : </li></ul><ul><ul><li>break even point </li></ul></ul><ul><ul><li>sensitivity analysis </li></ul></ul><ul><ul><li>probability analysis </li></ul></ul>
  101. 101. How can we finance our growth ? <ul><li>Financial aspect of firm’s life cycle </li></ul><ul><li>Introduction </li></ul><ul><ul><li>Negative net profit (loss) </li></ul></ul><ul><ul><li>Negative cash flow </li></ul></ul><ul><li>Rapid growth </li></ul><ul><ul><li>Profitable business at the end of this stage </li></ul></ul><ul><ul><li>Financing growth from external sources </li></ul></ul><ul><li>Slow growth </li></ul><ul><ul><li>Positive net cash flow </li></ul></ul><ul><li>Maturity </li></ul><ul><ul><li>Cash generator – significant cash inflow </li></ul></ul><ul><ul><li>Necessity for profitable reinvesting </li></ul></ul><ul><li>Declining </li></ul><ul><ul><li>Minimum profitability </li></ul></ul><ul><ul><li>Insufficient cash flow for reinvesting </li></ul></ul>
  102. 102. How can we finance our growth ? <ul><li>Financing growth from two sources (for existing business) : </li></ul><ul><ul><li>Retained earnings </li></ul></ul><ul><ul><li>New credits </li></ul></ul><ul><li>In case of liquidity problem : </li></ul><ul><ul><li>new short term debt </li></ul></ul><ul><ul><li>new long term debt </li></ul></ul><ul><ul><li>cutting costs </li></ul></ul><ul><li>Additional sources of finance : </li></ul><ul><ul><li>leasing </li></ul></ul><ul><ul><li>spontaneous sources of finance </li></ul></ul>
  103. 103. Strategic resources <ul><li>The most important strategic resources : </li></ul><ul><ul><li>human resources </li></ul></ul><ul><ul><li>technology </li></ul></ul><ul><ul><li>R&D </li></ul></ul><ul><ul><li>marketing </li></ul></ul><ul><ul><li>production </li></ul></ul><ul><ul><li>logistics </li></ul></ul><ul><ul><li>quality </li></ul></ul>
  104. 104. Human resources <ul><li>Management – ability to conduct business through people </li></ul><ul><li>Competitive advantage and human factor </li></ul><ul><li>Basic functions : </li></ul><ul><ul><li>selection </li></ul></ul><ul><ul><li>results and evaluation </li></ul></ul><ul><ul><li>rewarding </li></ul></ul><ul><ul><li>development </li></ul></ul><ul><li>Full time job and continuous employment loose their primary role in people’s lives </li></ul><ul><li>Life-long learning </li></ul><ul><li>Knowledge – the essence of competitive advantage </li></ul><ul><li>“ Learning organization ” </li></ul><ul><li>Changes and resistance </li></ul>
  105. 105. Human resources
  106. 106. Technology <ul><li>Technology = know-how </li></ul><ul><li>Technology = application of knowledge </li></ul><ul><li>Technology strategy = the way of acquiring and using the technology </li></ul><ul><li>Fit between technology strategy and company’s strategy </li></ul><ul><li>IT and strategic management </li></ul>
  107. 107. Research & development (R&D) <ul><li>Importance of R&D for company and economy </li></ul><ul><li>Mechanism for changes in a comapny </li></ul><ul><li>Statistical measure of a country’s R&D effort – percentage of GDP planned for R&D </li></ul><ul><li>Significant R&D questions in a company : </li></ul><ul><ul><li>How much should we invest in R&D in order to have new products and processes ? </li></ul></ul><ul><ul><li>How much should we invest in existing processes and products improvement ? </li></ul></ul><ul><ul><li>Could we succeed in a new area of R&D, bearing in mind knowledge and experience that we posses ? </li></ul></ul><ul><li>Integration of R&D objectives in overall strategy! </li></ul><ul><li>R&D is more important for intensive growth strategies and diversification </li></ul><ul><li>R&D may help in costs reduction and differentiation </li></ul>
  108. 108. Marketing <ul><li>Key concepts : </li></ul><ul><ul><li>marketing communication </li></ul></ul><ul><ul><li>segmentation, targeting and positioning </li></ul></ul><ul><ul><li>differentiation </li></ul></ul><ul><ul><li>relationships and networks </li></ul></ul><ul><ul><li>supply chain </li></ul></ul><ul><ul><li>competitive struggle </li></ul></ul><ul><ul><li>marketing mi x </li></ul></ul>
  109. 109. Production <ul><li>Production system : </li></ul><ul><ul><li>Input – transformation – output </li></ul></ul><ul><li>System – work operations </li></ul><ul><li>Products vs. services </li></ul><ul><li>Key production factors : </li></ul><ul><ul><ul><li>costs </li></ul></ul></ul><ul><ul><ul><li>quality </li></ul></ul></ul><ul><ul><ul><li>time of delivery </li></ul></ul></ul><ul><ul><ul><li>flexibility </li></ul></ul></ul><ul><li>Production management: planning , organizing , control </li></ul><ul><li>The models of production system organization : </li></ul><ul><ul><li>Process oriented </li></ul></ul><ul><ul><li>Product oriented </li></ul></ul>
  110. 110. Logistics <ul><li>Logistics is a set of activities with the task of achieving economical transfer of products form the place of origin to the place of usage, in regard of customers needs </li></ul><ul><li>Logistics elements : </li></ul><ul><ul><li>place </li></ul></ul><ul><ul><li>transport </li></ul></ul><ul><ul><li>warehousing </li></ul></ul><ul><ul><li>data management </li></ul></ul><ul><ul><li>procurement </li></ul></ul><ul><ul><li>supplies </li></ul></ul>
  111. 111. Quality <ul><li>The customer determines the quality ! </li></ul><ul><li>Market oriented concept </li></ul><ul><li>Marketing sector employees have significant role in delivering quality product </li></ul><ul><li>Different aspects of quality analysis : </li></ul><ul><ul><li>dimensions </li></ul></ul><ul><ul><li>functions </li></ul></ul><ul><ul><li>tactile characteristics </li></ul></ul><ul><ul><li>reliability </li></ul></ul><ul><ul><li>safety </li></ul></ul><ul><li>Quality management evolution : </li></ul><ul><ul><li>controlling </li></ul></ul><ul><ul><li>quality control </li></ul></ul><ul><ul><li>quality assurance </li></ul></ul><ul><ul><li>total quality management </li></ul></ul>
  112. 112. Assignment : Incorporating strategic resources in strategy <ul><li>Which strategic resources are the basis of your competitive advantage and why ? </li></ul><ul><li>Is there any irrelevant strategic resource for you and why ? </li></ul><ul><li>PRESENTATION OF FORMULATED STRATEGIES </li></ul>
  113. 113. Thank you for your attention ! Questions?
  114. 114. Modul e : STRATEGY FOR MY BUSINESS Topic of the day : Transforming strategy into action
  115. 115. Short overview of defined strategies <ul><li>Team representatives have 3 minutes to remind us of their work in previous days </li></ul>
  116. 116. Key success factors (K SF ) <ul><li>“ Success is where preparation and opportunity meet ” </li></ul><ul><li>K S F – factors which represent the necessity for success </li></ul><ul><li>Assignment : </li></ul><ul><ul><li>Fill the blanks : </li></ul></ul><ul><ul><li>In order for our firm to be successful, we have to be particularly skillful in the following activities : </li></ul></ul><ul><ul><ul><li>_______________________ </li></ul></ul></ul><ul><ul><ul><li>_______________________ </li></ul></ul></ul><ul><ul><ul><li>_______________________ </li></ul></ul></ul>
  117. 117. The significance of adequate implementation <ul><li>In order to succeed, implementation is vital (maybe even more important than formulation) ! </li></ul><ul><li>70% of well formulated strategies fail thanks to bad implementation </li></ul>
  118. 118. What needs to be done in order to have good implementation ? <ul><li>To organize adequately </li></ul><ul><li>To allocate resources in the right way ( tangible and intangible ) </li></ul><ul><li>To motivate the employees </li></ul><ul><li>To have good administrative support (IS, policies , procedures ...) </li></ul><ul><li>To create healthy business culture and climate </li></ul><ul><li>To control and audit </li></ul>
  119. 119. Organization <ul><li>Right man for the right job </li></ul><ul><li>Types of organizational structures </li></ul><ul><li>Life cycle requires different organizational structures </li></ul><ul><li>Flexibility, innovations , entrepreneurial spirit </li></ul>
  120. 120. Resource allocation <ul><li>Budget and program for every activity (business function) </li></ul><ul><li>Focus on achieving identified goals </li></ul><ul><li>Efficient resources exploitation </li></ul>
  121. 121. Employees motivation <ul><li>Vision, mission, objectives – influence on motivation </li></ul><ul><li>Working conditions and corporate climate – strategy implementation support </li></ul><ul><li>Rewarding systems </li></ul><ul><li>Result orientation ! </li></ul>
  122. 122. Administrative support <ul><li>Policies and procedures </li></ul><ul><li>Company’s information system </li></ul><ul><li>Accounting system </li></ul>
  123. 123. Corporate culture
  124. 124. Control and audit <ul><li>Control – comparing achieved and planned </li></ul><ul><li>Audit – comparing planned and possible </li></ul><ul><li>When to perform control : </li></ul><ul><ul><li>after strategy formulation </li></ul></ul><ul><ul><li>during implementation </li></ul></ul><ul><ul><li>after implementation </li></ul></ul><ul><li>Tools for control : </li></ul><ul><ul><li>objectives </li></ul></ul><ul><ul><li>budget </li></ul></ul><ul><ul><li>financial statements </li></ul></ul>
  125. 125. Thank you for your attention ! Questions?