Transcript sm ch 4
Module 1 Content • Key success factors • Driving force • Strategic Group Mapping Key Success Factors • Limited number (usually between 3 to 8) of characteristics, conditions, or variables that have a direct and serious impact on the effectiveness, efficiency, and viability of an organization, program, or project. • Activities associated with CSF must be performed at the highest possible level of excellence to achieve the intended overall objectives. • Also called key success factors (KSF) or key result areas (KRA). Key Success Factors • A key success factor is a performance area of critical importance in achieving consistently high productivity. • There are at least 2 broad categories of key success factors that are common to virtually all organizations: business processes and human processes. KSF example • In the real estate development industry, acquiring land and maintaining liquidity are the two key success factors. • If every other factor concerning the business of the development company is just average, but the land is well located and the firm maintains adequate liquidity, the company will do well. KSF example • In the computer software market, the key success factors are establishing efficient channels of distribution and providing aftersales support. example • Sam Walton viewed Wal-Mart's distribution system as a key to their success - a distinctive core competency. • In the mid-1990s, their distribution costs were about 3% of ship goods, their competitors 4.5 to 5%. • It took them 20 years to get there. • The difference is profit, which can be applied to build further advantage. • For John Deere dealers, after-market service and parts contribute significantly to the bottom line. • Corporate and family farmers cannot afford to have a key piece of equipment fail during harvest - a key factor in their buying decision. • To help the dealers hold down labor costs, to improve scheduling, and to perform to their customers expectations, John Deere has invested millions to develop self-diagnostic electronics so the machinery will inform the dealer a part is about to fail. "Fix it before it breaks" is a distinctive core competency. Driving force • Industries change because forces are driving industry participants to alter their actions • Driving forces are the major underlying causes of changing industry and competitive conditions • Where do driving forces originate? – Outer ring of macroenvironment – Inner ring of macroenvironment Analyzing Driving Forces: Three Key Steps STEP 1: Identify forces likely to exert greatest influence over next 1 - 3 years – Usually no more than 3 - 4 factors qualify as real drivers of change STEP 2: Assess impact – Are the driving forces acting to cause market demand for product to increase or decrease? – Are the driving forces acting to make competition more or less intense? – Will the driving forces lead to higher or lower industry profitability? STEP 3: Determine what strategy changes are needed to prepare for impacts of driving forces Common Driving Forces • Emerging new Internet capabilities and applications • Increasing globalization of industry • Changes in who buys the product and how they use it • Product innovation • Technological change/process innovation • Marketing innovation Common Driving Forces • Entry or exit of major firms • Diffusion of technical knowledge • Changes in cost and efficiency • Consumer preferences shift from standardized to differentiated products (or vice versa) • Changes in degree of uncertainty and risk • Regulatory policies / government legislation • Changing societal concerns, attitudes, and lifestyles Strategic Group Mapping One technique to reveal different competitive positions of industry rivals is strategic group mapping A strategic group is a cluster of firms in an industry with similar competitive approaches and market positions Strategic Group Mapping • Firms in same strategic group have two or more competitive characteristics in common – Have comparable product line breadth – Sell in same price/quality range – Emphasize same distribution channels – Use same product attributes to appeal to similar types of buyers – Use identical technological approaches – Offer buyers similar services – Cover same geographic areas Procedure for Constructing a Strategic Group Map STEP 1: Identify competitive characteristics that differentiate firms in an industry from one another STEP 2: Plot firms on a two-variable map using pairs of these differentiating characteristics STEP 3: Assign firms that fall in about the same strategy space to same strategic group STEP 4: Draw circles around each group, making circles proportional to size of group’s respective share of total industry sales Strategic Group Mapping Guidelines: Strategic Group Maps • Variables selected as axes should not be highly correlated • Variables chosen as axes should expose big differences in how rivals compete • Variables do not have to be either quantitative or continuous • Drawing sizes of circles proportional to combined sales of firms in each strategic group allows map to reflect relative sizes of each strategic group • If more than two good competitive variables can be used, several maps can be drawn Guidelines: Strategic Group Maps • The closer strategic groups are on the map, the stronger the cross-group competitive rivalry tends to be • Not all positions on the map are equally attractive – Driving forces and competitive pressures often favor some strategic groups and hurt others – Profit potential of different strategic groups varies due to strengths and weaknesses in each group’s market position