What you will learn in this Section ?

• Envisioning Strategy– Definition– Framework– Visual Models

• External Analysis– PEST– PEST Impact Analysis

• Industry and Competitive Analysis– Industry Structure– Evolution of Industries– Industry Supply Chain– Potential Industry Earnings– Porter’s 5 Forces Analysis– Competitive Intensity– Strategies for minimizing competitive

forces– Perceptual Map– Barriers to Entry/Incumbency advantages– DSIR effect

• Company Resources and Capabilities– ARC Analysis/HR– SWOT Analysis– Value Creating Processes/Core

Competencies– Strategic Gameboard– Balanced Scorecard– Change Management

© Sunil Mehrotra

Understanding Strategic Management is like pealing an

onion

The environmentThe environment

International lawInternational law

GovernmentsGovernments

Standards bodiesStandards bodies

StakeholdersStakeholders

Supplier’s Supplier’s supplierssuppliers

Customer’s Customer’s customerscustomers

New entrantsNew entrants

CustomersCustomersSuppliersSuppliers

CompetitorsCompetitors

SubstitutesSubstitutes

OrganisationOrganisation

A Visual Model

Business Ecosystem

New Paradigm Consulting

Business Ecosystem: A more granular view

Mbam619 framework models

Firm's Resources-Tangible and Intangible Assets

Aligning Organization, Systems and Processesto Goals and Strategy

to create sustainable Competitive Advantage

Adapted from:www.buildingbrands.com/didyouknow/14_7s_mckinsey

Mckinsey 7-S Framework

Strategy: The direction and scope of the company over the long term.

•

Structure: The basic organization of the company, its departments, reporting lines, areas of expertise, and responsibility (and how they inter-relate

Systems: Formal and informal procedures that govern everyday activity, covering everything from management information systems, through to the systems at the point of contact with the customer (retail systems, call centre systems, online systems, etc).

Skills: The capabilities and competencies that exist within the company. What it does best.

Shared values: The values and beliefs of the company. Ultimately they guide employees towards 'valued' behavior.

Staff: The company's people resources and how they are developed, trained, and motivated.

Style: The leadership approach of top management and the company's overall operating approach.

Hardware

S

Software

Designing Firm's ARC to align with Strategy

Transforming Resources to Capabilities Advantage

Firm's Resources

Key functions and activities within a firm

Sup

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Man

ufac

ture

rs

Dis

trib

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s

Ret

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rs

Con

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Adapted from: http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/HomaHelp.htm

Key OperationalIssues

Activity Based View of Value Creation Process

Infrastructure

Human Resources

Technology Development

Procurement

InboundLogistics

OperationsOutboundLogistics

Marketingand

Sales

Service

Profit

Margin

Profit Margin

Support Activities

Primary Activities

Sequence of Activities

Starbuck’s key activitiesthat create Value

MARG IN

InboundLogistics

Operations MarketingAnd Sales

OutboundLogistics

- Financial Policy - Legal- Accounting

- Organizational Form- Incentive Systems

- New Espresso Machines

- Roasting Coffee

- Operating Stores

- Barista Training

- Buying Coffee

- Other Purchasing

- Superior Rewards

- Better Espresso Machines- New Clover Method

- Maintaining Stores

- CPG’s in retailers

- Desirable store settings (3rd Place)

- Excellent Customer Service

- Limited Advertising

Firm Infrastructure

Human ResourceManagement

TechnologyDevelopment

Procurement

- Only the best 3% of coffee

Nicholas Merriam, April 2008 MBA, Graziadio School of Business and Management Pepperdine University

Progressive's value creating activities

Infrastructure

HR

Technology

Procurement

•Financial Policy•Regulatory Compliance

•Legal•Accounting

•Org. structure•Incentive system

•Actuary Training

•Agent Training

Adjuster•Training

•Actuarial methods •Investment practices

•Information Technology

•New Product Dev.•Market Research

•Settlement Procedures

Communication •Technology

•Data Gathering

•Rating•Underwriting•Investment

•Policy Issuing•Billing & Collection

•New Policy sales•Policy Renewals•Policy Repricing•Create Network ofindependent agents•Build internal sales force•Agent Management•Advertising

•Claims Response•Loss settlement•Loss Control

Walmart's Value CreatingActivities

Infrastructure

HR

Technology

Procurement

What is the Firm's ARC?

• How is the firm organized?– ARCHITECTURE

• What are the firm's processes for getting things done?– ROUTINEs

• What are the firm's shared values?– CULTURE

• How well does the Firm's ARC align with its strategy?

What is the best ARC for the firm seeking....

• Product Leadership(Innovation) ?

• Operational Efficiency (Cost leadership)?

• Customer Intimacy (Customer focus)?

Firm's Architecture

Geography

Leader on a pedestal

ARCHITECTURE: Functional

ARCHITECTURE: By Product

ARCHITECTURE: Matrix

ARCHITECTURE: By Geography

Components of Culture

How does a firm organize, resource, set policies and procedures, establish

behavioral norms for

• High-growth ?• Product innovation?• Cost leadership?• Customer intimacy?• Global reach?• Survival?• Uncertainty?• Leveraging core competencies?

Process for Creating sustainable competitive advantage through ARC

Aligning Resources to Market Opportunities and Threats to create sustainable competitive

advantage

Opportunities

Threats

Strengths+ +Weaknesses- -

$

SWOT Analysis

Nappies 15-17

ARc Analysis

Transforming resources to capabilities through firm's ARC

Strategic SWOT Analysis

Mnemonic 8Transforming Resources to Capabilities

Advantage

Mnemonic 9Process for Creating sustainable competitive advantage

through ARC

Mnemonic 10Aligning Resources to Market Opportunities and Threats

to create sustainable competitive advantage

Opportunities

Threats

Strengths+ +Weaknesses- -

$

Mnemonic 11Strategic SWOT Analysis

ARC for Product Innovation