Strategic Business Management
Download
Report
Transcript Strategic Business Management
STRATEGIC BUSINESS
MANAGEMENT PRINCIPLES
AGBE 445
Agribusiness Management
Dr. Gary W. Brester
Department of Agricultural Economics and
Economics
1
THREE PRIMARY ASPECTS OF
STRATEGIC BUSINESS MANAGEMENT
Industry and Competitive Analysis
Strategy and Competitive Advantage
Company Situation and Analysis
2
THREE PRIMARY ASPECTS OF
STRATEGIC BUSINESS MANAGEMENT
Industry and Competitive Analysis
Strategy and Competitive Advantage
Company Situation and Analysis
3
INDUSTRY AND COMPETITIVE
ANALYSIS
Situation Analysis
Industry Environment
Five Competitive Forces
Driving Forces
Key Success Factors
4
INDUSTRY AND COMPETITIVE
ANALYSIS
Situation Analysis
Industry Environment
Five Competitive Forces
Driving Forces
Key Success Factors
5
WHY DO A SITUATION ANALYSIS?
Objective
Identify features in a firm’s external & internal
environment which frame its window of
STRATEGIC OPTIONS
OPPORTUNITIES
Focuses on two considerations:
EXTERNAL factors: MACRO environment
(industry & competitive conditions)
INTERNAL factors: MICRO environment
(firm’s internal situation & competitive position)
6
Figure 1: How Strategic Thinking and
Analysis Lead to Good Choices
Thinking Strategically
About Industry
and Competitive
Conditions
Identifying
Strategic Options
Open to the
Company
Choice of
The Best
Strategy
Thinking Strategically
About a Company’s
Own Situation
7
INDUSTRY AND COMPETITIVE
ANALYSIS
Situation Analysis
Industry Environment
Five Competitive Forces
Driving Forces
Key Success Factors
8
KEY QUESTIONS REGARDING
EXTERNAL ENVIRONMENT
1. Industry’s dominant economic traits
2. Competitive forces at work in industry &
strength
3. Drivers of change in industry
4. Firms in strongest/weakest competitive
positions
5. Competitive moves of rivals
6. Key factors determining competitive success
or failure in industry
7. Attractiveness of industry
9
IDENTIFYING AN INDUSTRY’S
DOMINANT ECONOMIC TRAITS
Market size & growth rate/stage in life cycle
Scope of competitive rivalry
Number of competitors & relative sizes
Prevalence of backward/forward integration
Entry/exit barriers
Nature & pace of technological change
Product & customer characteristics
Scale economies & experience curve effects
Capacity utilization & capital requirements
Industry profitability
10
INDUSTRY AND COMPETITIVE
ANALYSIS
Situation Analysis
Industry Environment
Five Competitive Forces
Driving Forces
Key Success Factors
11
ANALYSIS OF COMPETITIVE FORCES
Objective
To identify
Main SOURCES of competitive forces and
STRENGTH of these pressures
COMPETITIVE FORCES MATTER BECAUSE:
To be successful, strategy must be designed
to cope effectively with competitive pressures objective must be to build a strong, market
position based on competitive advantage!
12
Figure 2: The Five Forces Model of
Competition: A Key Analytical Tool
Substitute
Products
Suppliers
Rivalry
Among
Competing
Sellers
Potential
New
Entrants
Buyers
13
THE FIVE COMPETITIVE FORCES
1. RIVALRY among competing sellers in
an industry
2. SUBSTITUTE PRODUCTS offered by
firms in OTHER industries
3. Potential ENTRY of new competitors
4. Bargaining power of SUPPLIERS
5. Bargaining power of BUYERS
14
PROCEDURE: ANALYZING THE FIVE
COMPETITIVE FORCES
Identify main sources of competitive pressures
Rivalry among competitors
Substitute products
Potential entry
Bargaining power of suppliers
Bargaining power of buyers
Assess strength of each competitive force
Strong? Moderate? Weak?
Explain how each competitive force works & its
role in overall competitive picture
15
RIVALRY AMONG
COMPETING SELLERS
Usually the MOST POWERFUL of the five
competitive forces
Weapons of COMPETITIVE RIVALRY
Price
Quality
Performance features offered
Customer service
Warranties and guarantees
Advertising & special promotions
Dealer networks
Product innovation
16
COMPETITIVE FORCE
OF POTENTIAL ENTRY
New entrants boost competitive pressures
By bringing new production capacity into play
Through actions to build market share
Seriousness of threat of entry depends on
BARRIERS to entry
Expected REACTION of existing firms to entry
Barriers to entry exist WHEN
It is difficult for newcomers to enter market
A new entrant’s small sales volume puts it a
price/cost disadvantage
17
COMPETITIVE FORCE OF
SUBSTITUTE PRODUCTS
Concept
SUBSTITUTES matter when products of firms in
another industry enter the market picture
Examples
Transgenic Seeds vs. Chemicals
Transgenic Seeds vs. Traditional Seeds
18
COMPETITIVE FORCE OF SUPPLIERS
Suppliers are a strong competitive force when
Item makes up large portion of costs of product,
is crucial to production process, and/or
significantly affects product quality
It is costly for buyers to switch suppliers
They have good reputations & growing demand
for their product
They can supply a component cheaper than
industry members can make it themselves
They do not have to contend with substitutes
Buying firms are not important customers
19
COMPETITIVE FORCE OF BUYERS
Buyers are a strong competitive force when
They are large & purchase a sizable percentage
of industry’s product
They buy in volume quantities
They incur low costs in switching to substitutes
They have flexibility to purchase from several
sellers
Selling industry’s product is standardized
They can integrate backward
Product being purchased does NOT save buyer
money or has low value to buyer
20
STRATEGIC IMPLICATIONS OF THE
FIVE COMPETITIVE FORCES
Competitive environment is unattractive
when:
Rivalry is very strong
Entry barriers are low
Competition from substitutes is
strong
Suppliers & customers have
considerable bargaining power
21
INDUSTRY AND COMPETITIVE
ANALYSIS
Situation Analysis
Industry Environment
Five Competitive Forces
Driving Forces
Key Success Factors
22
IDENTIFYING & ASSESSING
DRIVING FORCES
Concept
Industry conditions change because
EXTERNAL FORCES are DRIVING
industry participants to alter their actions
DRIVING FORCES are the MAJOR
UNDERLYING CAUSES of changing
industry & competitive conditions
23
TYPES OF DRIVING FORCES
Changes in long-term industry growth rate
Changes in who buys the product & how
they use it
Product innovation
Technological change/process innovation
Marketing innovation
Entry or exit of major firms
Diffusion of technical knowledge
24
TYPES OF DRIVING FORCES
Increasing globalization of industry
Changes in cost and efficiency
Shifting from standardized to differentiated
products (or vice versa)
Regulatory influences & government policy
changes
Changing societal concerns, attitudes, &
lifestyles
Changes in degree of uncertainty & risk
25
INDUSTRY AND COMPETITIVE
ANALYSIS
Situation Analysis
Industry Environment
Five Competitive Forces
Driving Forces
Key Success Factors
26
PINPOINTING INDUSTRY
KEY SUCCESS FACTORS
Basic Concept
KEY SUCCESS FACTORS (KSFs) spell
difference between
Profit & loss
Competitive success or failure
A KEY SUCCESS FACTOR can be
Specific skill or talent
Competitive capability
Something a firm must do to satisfy
customers
27
PINPOINTING INDUSTRY KEY
SUCCESS FACTORS
Identifying KSFs is top priority as they
are good cornerstones of a firm’s strategy
Winning COMPETITIVE ADVANTAGE
often hinges on being distinctively
better than rivals at one or more of the
KSFs
KSFs consist of the 3 - 5 really major
determinants of financial & competitive
success in industry
28
INDUSTRY AND COMPETITIVE
ANALYSIS
Situation Analysis
Industry Environment
Five Competitive Forces
Driving Forces
Key Success Factors
29
THREE PRIMARY ASPECTS OF
STRATEGIC BUSINESS MANAGEMENT
Industry and Competitive Analysis
Strategy and Competitive Advantage
Company Situation and Analysis
30
STRATEGY AND COMPARATIVE
ADVANTAGE
Three Generic Competitive Strategies
Low-Cost Leadership Strategy
Differentiation Strategies
Focus Strategies
31
STRATEGY &
COMPETITIVE ADVANTAGE
COMPETITIVE ADVANTAGE exists when firm has
an edge in
Defending against competitive forces &
Securing customers
KEY TO SUCCESS
Convince customers firm’s product/service offers
SUPERIOR VALUE
Offer buyers a good product at a lower price
Use differentiation to provide a better product
buyers think is worth a premium price
32
WAYS TO WIN A
COMPETITIVE ADVANTAGE
Become the low-cost producer
Make the best-made product
Provide customer more value for the money
Save customer money
Provide superior customer service
Enhance performance buyer gets
Provide more convenient locations
Make a more reliable & durable product
33
Figure 3: The Three Generic
Competitive Strategies
TYPE OF ADVANTAGE SOUGHT
MARKET TARGET
Lower Cost
Broad Range
of Buyers
Buyer
Segment
or Niche
Low-Cost
Leadership
Strategy
Differentiation
Differentiation
Strategy
Focused
Strategy
34
THE THREE GENERIC
COMPETITIVE STRATEGIES
LOW-COST LEADERSHIP
Striving to be the overall low-cost provider in
industry
35
THE THREE GENERIC
COMPETITIVE STRATEGIES
DIFFERENTIATION
Striving to build customer loyalty by differentiating
one’s product offerings from rivals’ products
36
THE THREE GENERIC
COMPETITIVE STRATEGIES
FOCUS STRATEGY
Concentrating on a narrow buyer segment, outcompeting rivals on either a lower cost basis
or
offering niche members a product or service
customized to their needs
37
THREE PRIMARY ASPECTS OF
STRATEGIC BUSINESS MANAGEMENT
Industry and Competitive Analysis
Strategy and Competitive Advantage
Company Situation and Analysis
38
COMPANY SITUATION ANALYSIS
Determining How Well Present Strategy
is Working
SWOT Analysis
Strengths & Weaknesses of Firm
Opportunities & Threats Facing Firm
Strategic Cost Analysis & Value Chains
Assessing Firm’s Competitive Position
Identifying Strategic Issues
39
KEY QUESTIONS IN COMPANY
SITUATION ANALYSIS
1. How well is firm’s present strategy working?
2. What are firm’s strengths, weaknesses,
opportunities, & threats?
3. Are firm’s prices & costs competitive?
4. How strong is firm’s competitive position?
5. What strategic issues does firm face?
40
S W O T ANALYSIS
S W O T represents the first letter in
S trengths
W eaknesses
O pportunities
T hreats
SWOT analysis involves sizing-up firm’s
INTERNAL strengths & weaknesses and
EXTERNAL opportunities & threats
41
IDENTIFYING INTERNAL
STRENGTHS & WEAKNESSES
A STRENGTH is something firm is good at or
characteristic giving it an important capability
Useful skill
Important know-how
Valuable organizational resource or
competitive capability
Achievement giving firm a market
advantage
A WEAKNESS is something firm lacks, does
poorly, or condition placing it at a disadvantage
42
IDENTIFYING EXTERNAL
OPPORTUNITIES
OPPORTUNITIES most relevant to a
firm are factors in EXTERNAL
environment offering
Some kind of competitive
advantage
Important avenues for growth
43
IDENTIFYING EXTERNAL THREATS
EXTERNAL FACTORS posing a danger to firm
Emergence of cheaper technologies
Introduction of new/better products by rivals
Entry of low-cost foreign competitors
New regulations
Vulnerability to rise in interest rates
Potential of hostile takeover
Unfavorable demographic shifts
Adverse shifts in foreign exchange rates
Political upheaval in a country
44
SUMMARY
Industry and Competitive Analysis
Current Industry Situation
Competitive Forces in the Industry
Driving Forces Causing Change
Key Success Factors
Strategy and Competitive Advantage
Low-Cost Strategy
Differentiation Strategy
Focus Strategy
Offensive Strategy -- Implement
Defensive Strategy -- Protect
Company Situation and Analysis
SWOT Analysis
45