perspective final question

7/30/2019 Perspective Final Question

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Discuss competitive landscape affecting business environment with taking industry of ur choice?

A number of forces affect the competitive environment for businesses today, but these forces are not ofequal importance. We believe one is clearly more important than the others Barriers to Entry. If thereare barriers, it is difficult for new firms to enter the market and challenging for existing companies to

expand. Put simply, no other feature has as much influence on a companys success as where it stands in

regard to these barriers. Measured by potency and durability, economies of scale, when combined withsome customer captivity, provide the strongest and most durable moats. Pipelines earn high grades onboth counts.

Although it may seem counterintuitive, most competitive advantages based on economies of scale arefound in local and niche markets, where either geographical or product spaces are limited and fixed costsremain substantial. An attractive niche should be characterized by customer captivity, small size relativeto the level of fixed costs and the absence of vigilant dominant competitors. In fact, companies can buildquasi-monopolies in markets that are only large enough to support one company profitably, because itmakes no economic sense for a new entrant to spend the necessary capital to enter the markets.

Infrastructure firms provide an extraordinary example of niche domination. MLPs have high barriers toentry due to capital requirements and geographical monopolies. A business in the midstream is a tollcollector that takes products from one point to another. Many have monopolistic characteristics asbuilding a pipeline requires clearing multiple regulatory hurdles which can be challenging to overcomegiven ongoing environmental concerns. Furthermore, when there is not enough demand between twopoints to profitably support multiple pipelines, a single pipeline enjoys niche economics and can chargethe maximum allowable rates. Those rates can be quite attractive for owners as pipelines have asomewhat looser regulatory regime than utilities.

Our Investment Thesis

Thematically, MLPs represent an investment in the build-out of our domestic energy infrastructure over

the next few decades. Nearly all other infrastructure is contingent upon pipelines and other energy assetsto provide the lifeblood of our economy. These businesses operate toll-road business models supported bylong-life real assets, with inflation hedges built into long-term contracts, regional monopolistic footprints,and relatively inelastic long-term energy demand growth. The resulting operating fundamentals allowedMLPs to generate predictable cash flows and pay consistent and growing quarterly cash distributions overthe past few decades, which translate into very attractive investment characteristics: long-term stabilityand low volatility, attractive risk-adjusted returns, diversification via low correlation with other assetclasses, and the potential for an effective inflation hedge.

The two most comparable asset classes to MLPs are Utilities and Real Estate Investment Trusts (REITs).Both Utilities and MLPs benefit from inelastic long-term energy demand growth. However, Utilities aresubject to a more local and highly scrutinized regulatory body focused on returning cost savings to their

constituents. The interstate pipelines owned by MLPs, on the other hand, are predominantly regulated atthe federal level by the Federal Energy Regulatory Commission (FERC), where infrastructure assets areviewed as critical to energy security.

The commercial buildings held inside REITs are viewed as hard assets with inherent tangible value.Similarly, the steel pipelines and storage tanks that transport and store the nations energy are hard assetswith associated permanent value. The useful life of MLP income-producing assets is typically over fiftyyears. REIT rental income tends to fluctuate with macro-economic conditions and market demand;whereas MLPs benefit from inelastic energy demand and inflation-adjusted tariffs.


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Meaningful new infrastructure investment requires capital, and both are needed to efficiently connectgrowing areas of energy demand with new areas of supply. Pipeline and related infrastructure assets areexpected to support growing population centers and facilitate the transportation of natural gas and crudeoil across North America, creating a compelling investment opportunity in the coming decades. Growth inthe asset class will stem from additional organic projects, asset acquisitions from integrated majors, aswell as the monetization of assets held in private hands. According to the Interstate Natural Gas

Association of America, over the next two decades, roughly $130 to $210 billion of additional capitalexpenditures will need to be spent on natural gas infrastructure development to meet growing and shiftingenergy demands. On the acquisition front, we estimate that at least $200 billion of midstream assets arehoused at public and private corporate structures, all of which could eventually be acquired by MLPs.Longer-term, we believe new midstream infrastructure development represents a highly sustainablesecular growth story, with MLPs the natural structure to undertake the vast majority of such investment.Put simply, we are likely on the verge of the largest energy infrastructure build-out since World War II.

7-S Framework of McKinseyThe 7-S framework of McKinsey is a Value Based Management (VBM) model that describeshow one can holistically and effectively organize a company. Together these factors

determine the way in which a corporation operates.Shared ValueThe interconnecting center of McKinsey's model is: Shared Values. What does theorganization stands for and what it believes in. Central beliefs and attitudes.

StrategyPlans for the allocation of a firms scarce resources, over time, to reach identified goals.

Environment, competition, customers.

Structure

The way the organization's units relate to each other: centralized, functional divisions (top-down); decentralized (the trend in larger organizations); matrix, network, holding, etc.SystemThe procedures, processes and routines that characterize how important work is to be done:financial systems; hiring, promotion and performance appraisal systems; information

systems.

StaffNumbers and types of personnel within the organization.

StyleCultural style of the organization and how key managers behave in achieving the

organizations goals. Management Styles.

SkillDistinctive capabilities of personnel or of the organization as a whole. Core Competences.

Element of 7S

modelApplication to digital marketing team Key issues from practice and

literature

Strategy The significance of digital marketing in Gaining appropriate budgets and


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influencing and supporting

organisations' strategydemonstrating / delivering value and

ROI from budgets. Annual planningapproach.Techniques for using digital

marketing to impact organisation

strategy

Techniques for aligning digitalstrategy with organisational and

marketing strategyStructure The modification of organizational

structure to support digital marketing. Integration of team with othermanagement, marketing (corporatecommunications, brand marketing,

direct marketing) and IT staffUse of cross-functional teams andsteering groupsInsourcing vs. outsourcing

Systems

The development of specific processes,

procedures or information systems tosupport digital marketing

Campaign planning approach-

integration

Managing/sharing customerinformationManaging content qualityUnified reporting of digital marketingeffectivenessIn-house vs. external best-of-breed

vs. external integrated technologysolutions

Staff The breakdown of staff in terms of theirbackground and characteristics such asIT vs. Marketing, use of

contractors/consultants, age and sex.

Insourcing vs. outsourcing

Achieving senior management buy-

in/involvement with digitalmarketingStaff recruitment and retention.

Virtual workingStaff development and training

StyleIncludes both the way in which key

managers behave in achieving theorganizations' goals and the culturalstyle of the organization as a whole.

Relates to role of digital marketing

team in influencing strategy

it is it dynamic and influential orconservative and looking for a voice

SkillsDistinctive capabilities of key staff, butcan be interpreted as specific skill-sets

of team members.

Staff skills in specific areas: supplier

selection, project management,Content management, specific e-

marketing approaches (SEO,PPC,affiliate marketing, e-mail

marketing, online advertising)

Superordinategoals

The guiding concepts of the digitalmarketing organisation which are alsopart of shared values and culture. The

internal and external perception of

these goals may vary

Improving the perception of theimportance and effectiveness of thedigital marketing team amongst

senior managers and staff it works

with (marketing generalists and IT)


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The challenge for a marketing strategy is to find a way of achieving a sustainable competitiveadvantage over the other competing products and firms in a market.

A competitive advantage is an advantage over competitors gained by offering consumersgreater value, either by means of lower prices or by providing greater benefits and service that

justifies higher prices.Porter suggested four "generic" business strategies that could be adopted in order to gaincompetitive advantage. The strategies relate to the extent to which the scope of a business'activities are narrow versus broad and the extent to which a business seeks to differentiate itsproducts.

The differentiation and cost leadership strategies seek competitive advantage in a broad range ofmarket or industry segments.

By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market orindustry.

Cost leadership

With this strategy, the objective is to become the lowest-cost producer in the industry. Thetraditional method to achieve this objective is to produce on a large scale which enables thebusiness to exploit economies of scale.

Why is cost leadership potentially so important? Many (perhaps all) market segments in theindustry are supplied with the emphasis placed on minimising costs. If the achieved selling pricecan at least equal (or near) the average for the market, then the lowest-cost producer will (intheory) enjoy the best profits.

This strategy is usually associated with large-scale businesses offering "standard" products withrelatively little differentiation that are readily acceptable to the majority of customers.Occasionally, a low-cost leader will also discount its product to maximise sales, particularly if ithas a significant cost advantage over the competition and, in doing so, it can further increase itsmarket share.

A strategy of cost leadership requires close cooperation between all the functional areas of abusiness. To be the lowest-cost producer, a firm is likely to achieve or use several of thefollowing:

High levels of productivity High capacity utilisation Use of bargaining power to negotiate the lowest prices for production inputs Lean production methods (e.g. JIT) Effective use of technology in the production process Access to the most effective distribution channels

Cost focus


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Here a business seeks a lower-cost advantage in just one or a small number of market segments.The product will be basic - perhaps a similar product to the higher-priced and featured marketleader, but acceptable to sufficient consumers. Such products are often called "me-too's".

Differentiation focus

In the differentiation focus strategy, a business aims to differentiate withinjust one or a smallnumber of target market segments. The special customer needs of the segment mean that thereare opportunities to provide products that are clearly different from competitors who may betargeting a broader group of customers.

The important issue for any business adopting this strategy is to ensure that customers really dohave different needs and wants - in other words that there is a valid basis for differentiation - andthat existing competitor products are not meeting those needs and wants.

Differentiation focus is the classic niche marketing strategy. Many small businesses are able to

establish themselves in a niche market segment using this strategy, achieving higher prices thanun-differentiated products through specialist expertise or other ways to add value for customers.

There are many successful examples of differentiation focus. A good one is Tyrrells Crispswhich focused on the smaller hand-fried, premium segment of the crisps industry.

Differentiation leadership

With differentiation leadership, the business targets much larger markets and aims to achievecompetitive advantage across the whole of an industry.

This strategy involves selecting one or more criteria used by buyers in a market - and thenpositioning the business uniquely to meet those criteria. This strategy is usually associated withcharging a premium price for the product - often to reflect the higher production costs and extravalue-added features provided for the consumer.

Differentiation is about charging a premium price that more than covers the additionalproduction costs, and about giving customers clear reasons to prefer the product over other, lessdifferentiated products.

There are several ways in which this can be achieved, though it is not easy and it requires

substantial and sustained marketing investment. The methods include:

Superior product quality (features, benefits, durability, reliability) Branding (strong customer recognition & desire; brand loyalty) Industry-wide distribution across all major channels (i.e. the product or brand is an

essential item to be stocked by retailers) Consistent promotional supportoften dominated by advertising, sponsorship etc


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Great examples of a differentiation leadership include global brands like Nike and Mercedes.These brands achieve significant economies of scale, but they do not rely on a cost leadershipstrategy to compete. Their business and brands are built on persuading customers to becomebrand loyal and paying a premium for their products

Departmentation

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perspective final question

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