Company

Company

1. Strategy Formulation

   • External Analysis
     • Sector
       • Group of closely related industries
         • Industry
           • Group of companies offering products or services that are close substitutes for each other
             • Satisfy the same basic customer needs
           • Opportunities (profitable)
           • Threats (endanger)
           • Life-cycle (not always followed)
             • 1. Embryotic Stage
               • Industry just beginning to develop
             • 2. Growth
               • Demand for the industry’s product begins to increase
             • 3. Shakeout
               • Growth slows, demand approaches saturation levels
             • 4. Maturity
               • The market is totally saturated, demand is limited to replacement demand, and growth is low or zero
             • 5. Decline
               • Growth becomes negative for a variety of reasons, including technological substitution, social changes, demographics, and international competition
           • FIVE FORCES MODEL (static picture and no individual company differences)
             • Risk of new entry by potential competitors
               • Function of the height of barriers to entry (the higher the barriers, the lower is the risk and the greater the profits)
                 • Economies of scale (Reductions in unit costs attributed to a larger output)
                   • Massproducing a standardized output
                   • Discounts on bulk purchases of raw material
                   • Spreading fixed production costs over a large production volume
                   • Distributing marketing and advertising costs over a large volume of output
                 • Brand loyalty
                   • Preference of consumers for the products of established companies
                 • Absolute Cost Advantage
                   • Superior production operations and processes due to accumulated experience, patents, or trade secrets
                   • Control of particular inputs required for production
                   • Access to cheaper funds
                 • Switching Costs
                 • Government Regulations
             • Extent of Rivalry among established firms
               • Function of an industry’s competitive structure, demand conditions, cost conditions, and barriers to exit (Strong demand conditions moderate the competition, weak demand conditions intensive competition can develop)
                 • Macro-environments that affect rivalry intensity (macroeconomic, global, technological, demographic and social, and political and legal)
             • Bargaining power of buyers
               • Threat if the company depends on buyers and they don´t
             • Bargaining power of suppliers
               • Threat if the company depends on buyers and they don´t
             • Threat of substitute products
               • Products serving customer needs similar to the needs served by the industry
             • 6th Power of complement providers
               • Powerful and vigorous complementors may have a strong positive impact on demand in an industry
   • Internal Analysis
     • Weaknesses
     • Strengths
       • Distinctive competencies (firm-specific strengths that allow a company to differentiate its products and/or achieve substantially lower costs to achieve a competitive advantage)
         • Resources (its financial, physical, human, technological, and organizational assets)
           • Tangibles
           • Intangibles
         • Capabilities (its skills at coordinating resources and putting them to productive use)
         • COMPETITIVE ADVANTAGE
           • Build on its existing resources and capabilities and formulate strategies that build additional resources and capabilities
           • Superior value creation
             • Low Costs
             • Differentiate Product
             • Both
           • Building blocks
             • Efficiency (enables a company to lower its costs)
             • Quality (allows it to charge a higher price and lower its costs)
             • Innovation (can lead to higher prices or lower unit costs ... product/process)
             • Responsiveness to customers (allows it to charge a higher price)
           • Durability depends on the height of barriers to imitation, the capability of competitors, and environmental dynamism.
     • Analyze the financial performance (ROE, ROI, etc)
     • Absortive Capacity
       • The ability of an enterprise to identify, value, assimilate, and use new knowledge.

2. Strategic Groups

   • Groups of companies pursuing the same or a similar strategy
     • Its members constitute its immediate competitors
     • Switching strategic group may improve a company´s performance
       • Feasibility depends on the height of mobility barriers

3. ULTIMATE GOAL GENERATE VALUE

4. Failure factors: organizational inertia in the face of environmental change, the nature of a company’s prior strategic commitments, and the Icarus paradox