These slide show part 3 of the generic approach to strategic management used in the book.

1. A Generic Approach to Strategic Management
Creating and Presenting Strategic Plans
Part 3

2. Characteristic Comment
Market size ($) The larger the better
Growth Rate (%) The higher the better (AOTBE)
Life Cycle
Development, Growth, Maturity,
Decline
Maturity and Decline great if high
RMS
Customer Concentration
Customers accounting for 50% of sales
Good up to captivity
Competitor Concentration
Top 4 have 70% +
Great if you are in top 4
Average purchase Amount ($) Larger the better
Stability Stable or will it transform
Each Market Addressed

3. Characteristic Comment
Sales (€) The larger the better
Market share (%) The larger the better
Market share largest competitor (%) The lower the better
RMS The larger the better
RPQ The larger the better
Relative price The larger the better
New Prods/Sales (%) The larger the better
R&D/Sales (%) The larger the better
Nature of competition The more benign the better
Competitive Position

4. Characteristic Comment
Leadership Visionary
Leadership style Autocratic to consensual
Culture Taylor to Mayo
Communication Vertically and horizontally
Training/Employee Increasing?
Training/Sales Increasing?
Labour Turnover Lowest
Absenteeism Lowest
Leadership

5. Characteristic Comment
Plant and Equipment Parsimony
Sales/Total Assets Should increase
Number of employees Parsimony
Sales/Employees Should increase
Capacity utilisation The higher the better
Degree of integration Check
Asset Utilisation

6. Year 2013 2014 Score
Information about its competitive position
Sales (£Mn) 9.15 10.12
Market Share (%) 10 10
Market Share Largest Competitor (%) 15 17
RMS BCG 0.67 0.59
Relative Quality (%) Inferior Inferior
Price Relative to Competition (%) 112 112
New Product/Sales (%) 5 5
R&D/Sales (%) 0 0
Marketing/Sales (%) 0.5 0.5
Competition Aggressive Aggressive
Information about how it uses its assets
Plant and Equipment (£k) 1,200 1,500
Sales/Total Assets 7.62 6.75
Number of Employees 45 52
Sales/Employees (£k) 203 195
Capacity Utilisation (%) 80 80
Degree of Integration (%) High High
Information about leadership and behaviour
Leadership skill Good Good
Labour Turnover (%) 0 0
Information about its markets
Market size (£Mn) 90 102
Volume growth rate (%) 12.5 12.5
No. of Immediate Customers accounting for
50% of Sales
150 140
% of Market held by 4 largest Companies 45 50
Typical Purchase Amount (£k) 30 33
Life cycle of product in market Mature Mature
% Employees in Trade Unions Nil Nil
Profitability
ROCE (%) 50 48
Case study: Company X
Question: What is your assessment of this company and would you invest in it ?
M
L
A
48
Is this good?
C

7. Invest
Conclusion on Company X

8. The Cardinal Point The strategy Caveats
Competitive position
Firms with the highest market shares ought to have
the highest returns.
Build market share provided the long term
benefit outweighs the short-term cost.
Competitors’ responses
Firms with the highest RMSs ought to have the
highest returns.
Build market share provided the long term
benefit outweighs the short-term cost.
Competitors’ responses
Firms with the highest relative quality ought to have
the highest returns.
Build relative quality None: superior quality generally pays..
The most innovative firms will only achieve superior
returns if they already enjoy strong strategic positions
Build RPQ and RMS before significant
efforts in innovation
None
Control of patents & markets Build products and services which are
unique and can be kept proprietary
Uniqueness is key
Asset utilization
Firms with the lowest levels of investment intensity
ought to have the highest returns
Be very frugal about new capital
investment.
II is number one killer of profits. Spend warily.
Firms with most liquid assets tend to be more
profitable
Be wary of locking the firm into fixed
assets which may become investment
intensive
Technology is a fixed assets which may grow insidiously and destroy
profitability.
Firms with the highest levels of productivity ought to
have the highest returns
Increase productivity. Productivity should be in real terms, i.e. net of inflation.
Firms with the highest levels of capacity utilization
ought to have the highest returns
Increase capacity utilization In static markets where share growth is expensive, this may require
the reduction of capacity.
Vertical integration Increase value added. Not when it leads to II.
Leadership and behaviour
Respected and visionary The more so the better Difficult to judge precisely.
People The more connected the better. Difficult to judge precisely.
Labour turnover The lower the better. Always true.
Markets addressed
Firms with the highest growth in their served markets
ought to have the highest returns.
Seek growth segments. Not necessarily: check other features of growth segments.
Firms serving the most concentrated markets ought to
have the highest returns
Address markets which are most
concentrated and encourage
concentration
All other things being equal
Firms with the simplest logistics ought to have the
highest returns.
Simplify logistics, especially number of
customers and order size.
Becoming too dependent and a small number of customers
The less powerful the customers the better. Seek out customers who do not exert
power
Less powerful customers may not have appropriate scale.
Firms with the lowest levels of unionization ought to
have the highest returns.
Seek to encourage non rigid cost push
influences
Outside control of firm.
A Summary of the Strategy Compass

9. The End