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Part3 strategy
The document provides an analysis of strategic factors for a company using an Environmental Threat and Opportunity Profile (ETOP). It lists various external factors, rates their impact and importance, and identifies opportunities and threats. It then discusses pros and cons of the ETOP approach.
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Part3 strategy
- 1. Strategic Management Market Dynamics Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-1
- 2. ETOP Environmental Threat and Opportunity Profile Factor Impact Importance Opportunity Threat Regulatory 3 8 24 Competitive -2 7 -14 External Alliance 7 6 42 Internal Alliance -6 5 -30 Entrepreneurial 4 5 20 Info Highway 5 4 20 Financial 7 4 28 Social 2 3 6 In this ETOP factors are tailored and ordered as to their importance Regulatory - tremendous opportunity to push for deregulation, led by STPI. They have had their lesson and learned well Competitive - AT&T, Sprint External Alliance - solid, mutually reinforcing, long-term Internal Alliance - source of friction and reduction of ability to react Entrepreneurial - Stentor now much more entrepreneurial (all three elements) Info Highway - mergers and acquisition for cable, cellular, infotainment Financial - ability to increase leverage through debt Social - universal access concept, downsizing, leanness all socially acceptable Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-2
- 3. ETOP: Pros andCons Pros Cons • Help to determine the key • It doesn’t show the factors of threats and interactions between factors opportunities • It can’t reflect the dynamic • Good tool to qualify the factors environment related to company’s strategy • It’s a subjective analysis tool • Can consider many factors for each special case Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-3
- 4. Porter Competitive Analysis 5 Forces Model of Competition FIRMS IN OTHER FIRMS IN OTHER INDUSTRIES OFFERING INDUSTRIES OFFERING SUBSTITUTE PRODUCTS SUBSTITUTE PRODUCTS RIVALRY RIVALRY SUPPLIERS AMONG AMONG BUYERS SUPPLIERS COMPETING BUYERS COMPETING SELLERS SELLERS POTENTIAL POTENTIAL NEW ENTRANTS NEW ENTRANTS Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-4
- 5. Porter Analysis Substitutes Substitutes Suppliers Suppliers Market Customers Customers Market New Entrants New Entrants Horizontal Forces mature markets Vertical Forces growth markets Vertical and Horizontal competitive and changing markets Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-5
- 6. Porter Competitive Analysis- Wal-Mart Discount Retailing Discount Retailing New Entrants Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-6
- 7. Porter: NTI Sat. Tech. Sat. Tech. Telephone or Multimedia cost? Suppliers AT&T AT&T Baby Bells Suppliers NTI Baby Bells NTI Siemens Low cost producer Siemens NEC NEC Financial strength Growth market Price focus of customers - close to maturity Strategic Factors: Flexibility, enhancement, uniqueness (product/service combination), combine with GVA, new Porter needed? Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-7
- 8. Porter’s Five Forces:Pros and Cons Pros Cons • It’s a good tool to identify the clear • It often produces the same competitive environment and the recommendations for similar relationship for the five market forces organizations • It is an useful analysis model for the • It assumes relatively static new entrants and the existing market structures. competitor inside the market • It provides a good framework • It helps the company design for analysis but does not really competitive strategies and make right consider issues around decisions implementing changes to • It surfaces the inverse relationship reposition for strategic between profit margin or returns and advantage. the intensity of competition • It can’t show how a company • It provides useful inputs for performing performed relative to its other analysis competitors Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-8
- 9. Porter Competitive Analysis- Wal-Mart Potential rate of growth in industry Ease of entry of new firms into industry Intensity of competition among firms Degree of product suitability Degree of dependency on compl. Or supporting prod & srvcs Degree of bargaining power buyers and customers possess Degree of bargaining power suppliers and vendors possess Degree of technological sophistication in industry Rate of innovation in industry General level of management capability 0 1 2 3 4 5 6 7 8 Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-9
- 10. Competitive Environment Analysis 1.Potential rate of growth of industry (in real terms) 0-3% ___ 3-6% ___ 6-9 % ___ 9-12% ___ 12-15% ___ 15-18% ___ 18-21% ___ >21% ___ 2. Ease of entry of new firms into industry No barriers- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Virtually impossible to enter 3.Intensity of competition among firms Extemely competitive- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Almost no competition 4. Degree of product substitutability Many substitutes available- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -No substitutes 5. Degree of dependency on complementary or supporting products and services Highly dependent-___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Virtually independent Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-10
- 11. Competitive Environment Analysis 6.Degree of bargaining power buyers and customers possess Buyers dictate terms- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Selling firms dictate terms 7. Degree of bargaining power suppliers and vendors possess Suppliers dictate terms- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Buying firms dictate terms 8. Degree of technological sophistication in industry High-level technology- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Very low-level technology 9. Rate of innovation in industry Rapid innovation- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Almost no innovation 10. General levels of management capability Many very capable managers- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Very few capable managers Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-11
- 12. Competitive Sustainability Analysis Class Product Class 1 - Slow Cycle Resources Marlboro’s KSF: nurturing of protected market, defending and building the brand Class 2 - Standard Cycle Resources Lesser Brands KSF: Economies of Scale Market share/control Building product loyalty introducing new products to attack leader’s brand Class 3 - Fast Cycle Resources Financial Products KSF: market timing and intelligence Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-12
- 13. Strategic Map -Industry High Price Club Diversification Wal-Mart K-Mart Sears Low Low High Competitive Capability Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-13
- 14. Strategic Map -Industry AECL - CANDU High Westinghouse $288M General Electric Siemens $4,303M Diversification $1,792M Framatome ABB $984M $590M AECL Low Low High Competitive Capability Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-14
- 15. Porter’s Diamond Determinants of National Advantage Firm, Strategy, Structure, and Rivalry Factor Demand Conditions Conditions Related and Wal-Mart Supporting Industries Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-15
- 16. Industry Value Chain PC Industry Intel PC Makers Microsoft Chips Hardware Software Value captured by each player •value captured by neighbours influence competitive dynamics of PC makers •Intel & Microsoft capture high % of value •PC makers are squeezed and are forced to compete on volume because of low margins Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-16
- 17. Economies of ‘S’ • Scale (inputs,throughput, outputs) • Scope (production, technology, marketing, channels, core, competencies/capabilities) • Strength (relative market share, branding power, shelf power) • Structure (market/product linkages,decision flow, value chain management) • Speed (response time to market, product cycle time rate of technology absorption) • Strategy (optimal/minimal changes, Strategic design criteria) • Synergy (association with clusters, joint ventures, strategic alliances, coopetition) • Span (ability to focus on business: functional similarity, geographic dispersion, functional complexity, need for direction, need for coordination, planning demands, managerial help) • Sales (learning curve, experience curve) • State (organizational / product / production lifecycle) Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-17
- 18. Economies of ‘S’ Market Phase Economy (input based, budgets) Organization Effectiveness Administration (output based) Mgr Entrepreneur Efficiency (throughput based) Market Push (cost leader) Mature Market Pull Market Phase (focus) Competitive Intro Market Test (differentiation) Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-18
- 19. Key Success Factors- Giant Tiger Niche market: Good value for $ Distribution channel cross docking Good financial position Flexible experienced buyers Main street locations Franchisee relationship Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-19
- 20. Key Success Factors- Cross Keys Key Success Factors Measures Corporate credibility: Trade show recognition, speaking invites, # of RFP’s Technological reputation: Quality/reliability/performance Market Share: Revenue growth, # RFP’s Company morale: Turnover, employee interaction Recruiting effectiveness: Average # of ongoing vacancies, # of qualified applicants per vacancy Productivity: Revenue per employee Sales effectiveness: Contracts signed per # RFP’s answered Marketing effectiveness: Sales team approval, # of leads Growth management: Turnover, recruiting, productivity, employee morale Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-20
- 21. Critical Success Factors- Maclaren Industries •Quality of product and service •Ability to compete based on price in weak markets •Ability to meet the customer’s recycled content requirement Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-21
- 22. Key Success Factors- Mitel Dynamic product base Innovation Address segmentation Excellent service Distribution Be on the short list of suppliers for major customers Each segment with appropriate channels Economic value Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-22