STRATEGIC MANAGEMENTSESSIONS & SEMINARS
November 1, 2011Session 7 - 8
Our goal? Learn about & practice all steps of strategic planning process
• Choose a company for which to formulate a strategic business plan• Identify / formulate:
- mission statement – framework w/in which strategy shall be crafted
- corporate vision – where do we want to be in # years - business aims -> specific objectives
• Scan the environment – carry out external, internal & industry analysis -> situational analysis
-> Internal analysis - core business & competencies, resources available, corp. structure, required inputs, corp. culture
=> IFAS (Internal Factor Analysis Summary)
Our goal? Practice all steps of strategic planning process
• Environment scanning cont’d:-> External analysis - PEST(LE) => EFAS (External Factor Analysis
Summary)
- Industry Analysis (task environment):-> Porter’s Five (Six) forces => Industry Matrix
- Situational Analysis – finding a strategic fit b/w external opportu- nities & internal strengths
- mitigating harmful effects of external threats due to internal weaknesses
=> SFAS (Strategic Factor Analysis Summary) => SWOT analysis
Strategic Management ModelExisting Existing business model
Mission, vision, goals, objectives, corp. values
SWOT => Strategic
choice
External analysis ->
opportunities, threats
Internal analysis -> strengths,
weaknessesFunctional-level strategies
Business-level strategies
Corporate-level strategies
Strategy implementation
Strategic Management Cycle
External factor analysis - Summary
Michael Porter’s 5 Forces
Industry analysis – Porter’s 5 (6?) forces
Threat of new entrants
• Barriers to entry:
- economies of scale- product differentiation- capital requirements- switching costs- access to distribution channels- cost disadvantages independent of size- government policy
Industry analysis – Porter’s 5 (6?) forces
Rivalry among existing firms
• Rivalry related to:
- number of competitors- rate of industry growth- produce or service characteristics- amount of fixed costs- capacity- height of exit barriers- diversity of rivals
Industry analysis – Porter’s 5 (6?) forces
Threat of substitute products (goods/services)
• Products - satisfy the very same need as their direct substitutes• Although they appear to be different• If switching costs are low => strong effect on an industry
Relative power of stakeholders
• Labor unions• Governments• Shareholders• Banks …
Industry analysis – Porter’s 5 (6?) forces
Bargaining power of buyers
• Buyers are powerful when:
- they purchase large proportion of seller’s products- they are capable of integrating backward- there are many alternative suppliers- switching to other suppliers is not costly- the product purchased is NOT important to the final quality/price of buyer’s products- the product purchased accounts for a substantial %age of buyer’s costs- they earn low profits
Industry analysis – Porter’s 5 (6?) forces
Bargaining power of suppliers
• Suppliers are powerful when:
- Suppliers’ industry is dominated by a few players selling to many buyers- Their products are unique- Their products have high switching costs- Substitutes are hardly available or not at all- They can integrate forward and compete directly w/current customers- The goods made/sold by them to buyers constitute only a small portion of suppliers’ total product portfolio
Industry analysis – Porter’s 5 (6?) forces
Air-travel industry
• Rivalry among industry players- Airbus vs. Boeing (vs. ATR, Tupolev)
• Threat of new entrants- severe regulations- large capital investment- sophisticated supplier and support industries- highly skilled labor- zero/negative profits during an extended start-up phase- China/Russia/Japan or … ? may encourage a subsidized entry into market
of their own national company
Air-travel industry
• Bargaining power of buyers
- limited # of traditional and low cost airlines; leasing companies=> considerable & growing power b/c of decreased # of orders for new aircraft
- they have low switching costs -> Boeing is willing & able to offer better price &/or service than Airbus to steal orders from Airbus
- low cost airlines – order aircraft w/basic equipment easily to be produced by either of 2 manufacturers
Air-travel industry
• Bargaining power of suppliers- engine manufacturers – crucial for aircraft manufacturers
- gradually undergoing consolidation - non-existent substitutes due to certification requirements (high reliability/efficiency)
=> strong bargaining power weakened by shrinking military market to which they also supply
• Threat of substitutes- high-speed trains (Germany, France) traveling between points falling into air-travel network => lower demand for air-travel alternative- automobile industry – cars, highway network in EU, comfort (A/C)- IT – e.g. skype conference calls => no need to meet physically in 1 place
Air-travel industry
• Relative power of stakeholders
- Banks – loans to aircraft manufacturers backed up by long-term contracts
w/airlines, governments, renting companies ……
- Suppliers, labor unions, international relations in the defense sector …