Business Strategy

Session 4

Review

• The Process of Strategic Planning-Wk.1-3

• How to formulate a Strategy-Wk.4-6

– Stakeholders

– Environmental Analysis

– Organisational Analysis/Audit

– Strategic Positioning

2-4

PESTEL Framework

Political Economic

Technological

Environmental Legal

Social

2-5

The PESTEL Framework

2-6

Exhibit 2.2 The Five Forces Framework

Competitive rivalry

Potential entrants

Buyers

Substitutes

Suppliers

2-7

The Threat of Entry: Barriers to Entry

Scale and experience

Access to supply and distribution channels

Expected retaliation

Legislation or government action

Differentiation

2-8

Why Are Substitutes a Threat?

Substitutes can reduce demand for a particular class of products as customers switch to alternatives.

• Price/performance ratio

• Extra-industry effects

2-9

The Power of Buyers

Are buyers concentrated?

What are the costs of switching?

Does backward vertical integration exist?

2-10

The Power of Suppliers

Are suppliers concentrated?

What are the costs of switching?

Does forward vertical integration exist?

2-11

Degree of Competitive Rivalry

• Competitor balance

• Industry growth rate

• High fixed costs

• High exit barriers

• Low differentiation

4-13

Exhibit 4.7 Stakeholders of a Large Organisation

4-15

Exhibit 4.9 The Power/Interest Matrix

4-16

Questions Addressed with Stakeholder Mapping

• In determining purpose and strategy, which stakeholder expectations need to be most considered?

• Do the actual levels of interest and power reflect the corporate governance framework?

• Who are the key blockers and facilitators of strategy?

• Is it desirable to reposition certain stakeholders?

• Can level of interest or power of key stakeholders be maintained?

4-17

What is Power?

Power is the ability of individuals or groups to persuade, induce, or coerce

others into following certain courses of action.

4-18

Sources of Power Within Organisations

HierarchyInfluence

Control of strategicresources

Knowledgepossession

Control of human

resources

Involvement

Stakeholders

• A stakeholder is a group or an individual who has an interest in what the organization does or an expectation of the organization

Stakeholders’ Needs

• It is important that an organization understands the needs of the different stakeholders

Categories of Stakeholder

• Internal, Connected and External

Internal stakeholder

They are immediately connected with the organization and their objectives are likely to have a strong influence on how it is run

They include employees, managers and directors

Categories of StakeholdersConnected stakeholder

Viewed as having contractual relationship with the firm

They include shareholders, customers, suppliers and finance providers

Categories of Stakeholder

External stakeholder

Includes the government, local authorities, pressure groups and community at large.

This group will have quite diverse objectives and have varying abilities ensure that organization meets their objectives

Stakeholder Priorities

•Key players: strategy must be acceptable to them.

These are the people you must fully engage with, and make the greatest efforts to•Keep satisfied: They must be treated with care. They are capable of being key players. e.g. Large institutional shareholders

Stakeholder Priorities

• Keep informed: don’t have great ability to influence strategy but their views can influence powerful stakeholders. Keep these people adequately informed, and talk to them to ensure that no major issues are arising. These people can often be very helpful with the detail of your project. Example could be community representative or charities

• Minimal effort: keep these people adequately informed, and talk to them to ensure that no major issues are arising. These people can often be very helpful with the detail of your project.

Understanding Stakeholders

• What financial or emotional interest do they have in the outcome of your work? Is it positive or negative?

• Who influences their opinions generally, and who influences their opinion of you

• What motivates them most of all?

• What information do they want from you?

• How do they want to receive information from you? What is the best way of communicating your message to them?

• What is their current opinion of your work?

Understanding Stakeholders

• A very good way of answering these questions is to talk to your stakeholders directly – people are often quite open about their views, and asking people's opinions is often the first step in building a successful relationship with them.

Recap- Core competence• Stick to what your good at

• It will give you the best competitive advantage

• Core Competencies are not seen as being fixed. Core Competencies should change in response to changes in the company's environment. They are flexible and evolve over time. As a business evolves and adapts to new circumstances and opportunities, so its Core Competencies will have to adapt and change.

Recap- What is Strategic intent?

• This is simply the companies vision which we have already looked at.

• What is the purpose:

– The logic, uniqueness and discovery that make your strategic intent come to life are vitally important for employees.

– They have to understand, believe and live according to it.

Recap- What is strategic planning?

• Definition- is the process of designing a series of steps, or actions, which will be taken in order to achieve a particular objective. Looks at things needed including people.

Recap-The Ansoff Matrix1. Market penetration is?

existing markets, existing products: Market penetration occurs when a company enters a market with current products.

1. The best way to achieve this is by gaining competitors' customers

2. attracting non-users of your product3. convincing current clients to use more of your

product/service through advertising or other promotions.

Market penetration is the least risky way for acompany to grow.

Recap- The Ansoff Matrix

• Diversification is…?

• new markets, new products: Companies that dominant in one specific market can branch out into new markets to provide a new line of products that differ from their existing stock. This results in a company entering new markets where it had no presence before.

Recap- what is this?

• RECAP- A Stars is.....................................

• Stars may turn into cash cows, but only if the market for the product stabilises at a high market share. The classic example of a recent product that was a Star and has become a Cash Cow is the Apple IPod, along with ITunes. Other examples of Stars include the Toyota Prius, in the hybrid car category, and most 3G mobile phone services.

• RECAP- A Question marks/problem child is...

• In the mid 80's jeans were out of fashion, but the market for teenage clothes was growing fast. Levis re-launched their jeans, led by advertising for 501s, which had never been a style of jean worn for fashion. Within a few months sales has increased by a factor of 10, the product was a star. The TV adverts used pop songs as soundtrack, starting a trend which is still popular in marketing 25 years

later