Strategic Management & Framework

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Strategic Management & Framework Course Objectives Define fundamental concepts and frameworks of strategic management and competitive analysis. Explain structural determinants of industry competition and their impact on business strategy. Apply competitor analysis frameworks to evaluate competitive positions and predict competitor behavior. Analyze market signals and competitive moves to develop effective strategic responses. Evaluate various entry strategies for new business opportunities. Unit 1: Structural Analysis of Industries Structural analysis in strategic management involves examining a company's competitive landscape and internal structure to inform strategy. This includes competitive structure analysis (using models like Porter's Five Forces) to understand industry dynamics and a review of the company's own organizational structure to ensure it aligns with its strategic goals. Structural analysis in business is the process of evaluating a company's internal structure, competitive landscape, or processes to understand its strengths, weaknesses, and strategic position. This can involve examining financial health and management for investment purposes, analyzing competitive groups to guide strategy, or dissecting business processes to improve efficiency and alignment with goals. Mission, Vision, Values Mission: What do we do today? Who do we serve? What are we trying to accomplish? What impact do we want to achieve? Vision: Where are we going moving forward? What do we want to achieve in the future? What kind of future society do we envision? Values: What do we stand for? What behaviors do we value over all else? How will we conduct our activities to achieve our mission and vision? How do we treat members of our own organization and community? Vision Statement Examples IKEA: "To create a better everyday life for the many people". Google: "To provide access to the world's information in one click". Microsoft: "To help people and businesses throughout the world realize their full potential". Disney: "To make people happy". Tesla: "To create the most compelling car company of the 21st century by driving the world's transition to electric vehicles". Mission Statement Examples Tesla: "Tesla's mission is to accelerate the world's transition to renewable energy." Starbucks: "To inspire and nurture the human spirit- one person, one cup, and one neighborhood at a time." Coca-Cola: "The Coca-Cola Company exists to benefit and refresh everyone who is touched by our business." The Home Depot: "The Home Depot is in the home improvement business, and our goal is to provide the highest level of service, the broadest selection of products, and the most competitive prices." The Boeing Company, Africa Division: "Our mission is to establish a powerful presence and positive image of The Boeing Company with governments, businesses, and community leaders." Nike: "Our mission is to bring inspiration and innovation to every athlete* in the world. *If you have a body, you are an athlete." John Deere: "Double and Double Again the John Deere Experience of Genuine Value for Employees, Customers and Shareholders." External Structural Analysis Strategic Groups: Groups of firms within an industry that follow similar strategies, have similar market shares, and respond to events in similar ways. Supporting Industries: Examines the role of suppliers and other supportive industries in the overall competitive framework. Porter's Five Forces Analyzes the competitive landscape of an industry to understand the competitive pressures on a firm. Threat of New Entrants: Assesses how easy it is for new companies to enter the market. High barriers to entry (e.g., high startup costs, brand loyalty) will limit this threat. Bargaining Power of Suppliers: Analyzes the power suppliers have to raise prices or reduce the quality of their goods and services. Bargaining Power of Buyers: Examines how much power customers have to drive prices down or demand higher quality. Threat of Substitute Products: Considers the likelihood of customers finding a different type of product or service that meets the same need. Rivalry Among Existing Competitors: Evaluates the level of competition between existing firms in the industry, which can include factors like the number of competitors, the speed of innovation, and industry growth rate. Four Characteristics of Industry Structure Particularly important to the performance of new firms in the industry: Capital Intensity: Measures the importance of capital as opposed to labor in the production process. Advertising Intensity: A mechanism through which companies develop reputations that help them sell their products and services. Concentration Intensity: A measure of the market share that is held by the largest companies in an industry. Average Size Firm 8 Strategy Analysis Frameworks Gap Analysis VRIO Analysis Four Corners Analysis Value Chain Analysis SWOT Analysis Strategy Evaluation Porter's 5 Forces PESTEL Analysis Unit 2: Framework for Competitor Analysis Components of Competitor Analysis Company Overview: Understand their size, structure, and history. Products and Services: Analyze features, quality, and what they offer compared to your own. Pricing: Compare pricing strategies, discounts, and value-added perks like loyalty programs. Marketing and Promotion: Evaluate their marketing channels, social media presence, advertising efforts, and unique selling proposition. Distribution and Place: Understand their geographic reach and where and how they sell their products. Customer Experience: Analyze customer reviews, ratings, and service approaches to gauge customer satisfaction. Financials: Research their financial health by looking at reports like share prices and earnings. Intellectual Property: Identify any patents, trademarks, or copyrights they hold. SWOT Analysis: Conduct a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis for each competitor to identify their competitive advantages and disadvantages. Competitive Strategy: 4 Types (Porter's Generic Strategies) Porter basically suggests that a company can either compete on cost or differentiation, but not both. Cost Leadership: If a company operates in a broad market (serves a broad range of customers) and they are focused on offering the lowest cost, then the strategy they have chosen is cost leadership. Cost Focus: If a company operates in a narrow market (serves a small range of customers) and they are focused on offering the lowest cost, then the strategy they have chosen is cost focus. Differentiation Leadership: If a company operates in a broad market and is focused on differentiating their product by offering value or a unique feature, then the strategy they have chosen is differentiation leadership. Differentiation Focus: If a company operates in a narrow market and is focus on differentiating their product, then the strategy they have chosen is differentiation focus. Competitor Intelligence System The Competitor Intelligence System is the structured process and technology used to ethically collect, analyze, and apply data about competitors, markets, and customers to gain strategic advantages, anticipate market shifts, and make informed business decisions, covering aspects like pricing, products, strategies, and strengths/weaknesses. Key needs include real-time data, analytics for forecasting, and tools to process information from diverse sources like social media, financial reports, and public records for a comprehensive market view. Types of Competitive Intelligence Market Intelligence: Involves gathering and analyzing data about the market environment in which a company operates. This includes understanding the overall size of the market and its expected growth over time, helping companies gauge potential opportunities and scale their strategies accordingly. Product Intelligence: Focuses on understanding competitors' products and services in detail. This involves examining the specific features, functionalities, and benefits which help in benchmarking and identifying areas for improvement or differentiation. Customer Intelligence: Involves understanding the customers of competitors to inform better customer strategies. Analyzing the age, gender, income, location, and other demographic factors of competitors' customer base helps in identifying target market segments. Competitor Intelligence: Involves a comprehensive analysis of competitors' overall strategies and operations. Reviewing competitors' financial statements, profit margins, revenue growth, and cost structures helps in understanding how they operate and how your company could/should be operating. Unit 3: Market Signals Market Signal A market signal from competitor analysis is a strategic insight gained from studying rivals, such as their pricing changes or new marketing campaigns, which helps your business differentiate itself and adapt. This process involves gathering data on competitor products, marketing, and customer feedback to identify market trends, strengths, weaknesses, and opportunities to gain a competitive edge. Strategic Application of Signals Forecasting Demand: By analyzing historical data alongside current market signals, businesses can more accurately predict future demand for products and services, optimizing inventory and production. Informing Product Development: Negative customer feedback (a signal) can prompt innovation or product modification, ensuring offerings remain relevant to evolving needs. Positive signals about an emerging technology can guide R&D investments toward future-proof solutions. Risk Management: Signals like rising interest rates or supply chain disruptions allow companies to hedge against potential financial or operational risks before they cause significant damage. What is a Prediction Market? A platform where people trade contracts to forecast the likelihood of future events. Benefits: High Forecast Accuracy, Efficient Information Discovery, Transparency, Incentive Alignment, Adaptability. Identifying Emerging Consumer Needs By observing shifts in consumer behavior and preferences, businesses can predict future demand for new products or services. Example: Social Media Monitoring (Retail) A clothing brand notices a significant increase in social media discussions, shares of photos, and searches for "sustainable fashion". Prediction: Demand for eco-friendly and ethically produced clothing will grow rapidly. Action: The company invests in sustainable supply chains and launches a new eco-conscious product line, capturing early market share in this emerging segment. Anticipating Technological Disruption Signals within technology sectors can indicate when new innovations are poised to change an industry fundamentally. Example: Startup Funding (Finance) An established bank notices a wave of venture capital funding flowing into "fintech startups" specializing in mobile payments and blockchain technology. Prediction: These new technologies will disrupt traditional banking models by offering faster, cheaper services. Action: The bank launches its own digital payment platform and establishes a corporate venture fund to invest in or acquire promising fintech startups. In essence, market signals act as a business's early warning system and compass, transforming reactive decision-making into proactive strategy formulation. Types of Market Signals Prior Announcement: A formal communication made by a competitor that it either will or will not take some action, such as building a plant, changing price, and so on. Strategic Planning: Long-term strategic decisions—such as market entry or exit, mergers and acquisitions, and capacity expansion—are often based on the interpretation of robust market signals. Threats: Announcements can be threats of actions to be taken if a competitor follows through with a planned move. Example: If firm A learns of competitor B's intentions to lower its price on selected items in the product line, then firm A might announce the intention to lower its price significantly below B's. This may deter B from going through with the price change, because B now knows that A is unhappy with the lower price and is willing to start a price war. Tests of Sentiments: Announcements can be tests of competitor sentiments, taking advantage of the fact that they need not necessarily be carried out. Example: Firm A might announce a new warranty program to see how others in the industry will react. If they react predictably, then A will follow through with the change as planned. If competitors send signals of displeasure or announce somewhat different warranty programs than A has proposed, then A might either withdraw the planned move or announce a revised warranty program to match that of its competitors. Communication of Pleasure/Displeasure: Announcements can be a means of communicating pleasure or displeasure with competitive developments in the industry. Announcing a move that falls in line with a competitor's move might indicate pleasure, whereas announcing a punishing move or a substantially different approach to the same end can indicate displeasure. Conciliatory Steps: A function of announcements is to serve as conciliatory steps aimed at minimizing the provocation of a forthcoming strategic adjustment. The announcement seeks to avoid having a strategic adjustment touch off a round of unwelcomed retaliation and warfare. Example: Firm A might decide that price levels need to be adjusted downward in the industry. Announcing this move well ahead of time, and justifying it in terms of specific changes in costs, can avoid having firm B read the price change as an aggressive bid for market share and retaliating vigorously. This role of announcements is particularly common when a necessary strategic adjustment is not meant to be aggressive. However, announcements like these can also be designed to lull competitors into a sense. Avoiding Costly Simultaneous Moves: A function of announcements is to avoid costly simultaneous moves in areas like capacity additions, where bunching of new plant additions would lead to overcapacity. Firms might announce expansion plans well in advance, facilitating the scheduling of capacity additions by competitors in a sequence that will minimize overcapacity.