Estratégia e Competitividade A Envolvente Empresarial: das Megatendências aoMercado RelevanteAlberto Castro (acastro@porto.ucp.pt)

16.05.2018

Environment, strategy, organization andmanagement – a framework(fonte e modelo original: José Santos)

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E – where we are (will be) ; S – what we do (will do);

O – who we are (will be)

Environment, strategy, organization and management

Environment (context), strategy and performance

What determines or conditions what?

Simultaneity

To what extent? What are the degrees of freedom?

Determinism? Firm specific variables?

How does it condition? As usual?

Dynamics

Stability?

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Management is central- good news?

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Source: Bloom et al., 2014

If you think it must be the context, think again! Whereverthey locate, multinationals score higher

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The mean…

There are diferences between and within countries

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Still, context matters

- THE TREND IS YOUR FRIEND

- “The right product markets, technology, and geography are critical components of long-

term economic performance. Bad industries usually trump good management, however: in

sectors such as banking, telecommunications, and technology, almost two-thirds of the

organic growth of listed Western companies can be attributed to being in the right markets

and geographies. Companies that ride the currents succeed; those that swim against them

usually struggle. Identifying these currents and developing strategies to navigate them are

vital to corporate success.” (McKinsey, 2010)

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Some Critical Questions

What are the benefits of an international footprint when turbulence seems the denominator?

How long can our traditional sources of competitive advantage survive in the face of technological disruptions?

How will evolving societal values affect our business model?

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A framework for Organisingthe Information

MEGATRENDS

MARKET INFORMATION

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PEST analysis

Political/Legal

Economical

Social-cultural

Technological

New dimensions:

Environmental (Planet)

A Changing Context – trends and forces(adapted from McKinsey Quaterly, April 2017)

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New Growth ScenariosBeyond GlobalizationRebalancing power – the force of very large countries/marketsResources (un)limited?

Industry DisruptionTechnological IntegrationCustomer is the kingEcossystem revolution

New societal dealDark forcesThe need for co-operation

New Growth Scenarios:

Beyond Globalization; Deglobalization; Slobalization?

New political and economic (im)balances

From G7 to G20, from BRICs to ICASA to…

Economic power. Political power

The unprecedented challenges (economics and otherwise) of giantcountries

Unheard of – emerging and developing countries generate more growth than developed ones

Size matters

However…

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Rebalancing- the economy

Source: Economist Intelligence Unit

Or may be not

New political and economic (im)balances

OpportunitiesNew middle classes = new markets

Opportunities of “new” demographics

Specificities within globalisation

ChallengesAnti-globalization

Slowdown (traditional indicators), but

Acceleration (data flows)

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Resources (un)limited?

The Efficiency ImperativePricing the Planet

New values and attitudes towards environmentprotection and sustainability

A new bottom-line – planet

And this matters – see how much it costed (still costs) VW

Climate change (despite Trump)

Paris Agreement and new regulations

Trade-off between pressure to accomodate demand and scarceresources

The imperative: produce more with (historically) fewer workers and resources

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New values and attitudes towards environmentprotection and sustainability

Opportunities

“Clean-tech” industries

Electric vehicles and mobility/utility solutions

New York

Cross fertilization of different technologies

Circular economy

But also disruption

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The Efficiency Imperative:Market and Society

The need for growth and the role of markets

The 3rd bottom-line: peopleSocial responsibility: Art of doing well by doing good

Profits, Planet, People

Market left alone: growth and growing disparitiesSocial safety net and pressure upon public policies

Inequality and social unrest

Oppportunities for extremists

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Society on the move

There were countries, there are cities?

- UrbanizationAre we growing younger or older?

- DemographicsWho is in charge?

- Feminization

And also, the role of NGOs, the media, religion,…

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Urbanization

Ageing?

SOCIETY ON THE MOVE Women’s Power

Female to male workforce participation ratio1)

1) Proportion economically active females to males for population ages 15 and older . Source: World Bank

Industry Disruption:Technological Disruption

Technology – One step at a time!

(1)Transportation and CommunicationsThe world is “smaller”

(2) Information TechnologiesSharp drop in costs of collecting and processing informationThe world is becoming faster

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Moore’s law in practice (1) (Source: António Vidigal)

Moore’s law in practice (2) (Source: António Vidigal)

Technology – all together now!

(3) A new ball game- “from the few to the many; from the simple to the complex” (W. BrianArthur)

Examples: blockchain; machine learning; precision medicine; mobility solutions: …

From new products and services to new business models to new firms to…

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Stop Making Sense?!

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Stop Making Sense?!

The consumer is queen

Many services for freeWikipedia; Skype

Differentiation and specificityFrom sneakers to mobile-phones

Coexistence of open-source market with willingness to payWhat business model? How to create value and make money

Farfetch; long tail; …

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A new societal deal

Technology matters – not everything isstraightforward (productivity paradox)

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Technology matters (in more dimensionsthan it might seem)

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Technology matters (in more dimensions than itmight seem)

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Dark forces

Globalization, technology, uneven distribution of gains set the stage for populistalternatives

Fake newsDemocracy versus civilization?

As if it were not suficientTerrorismCybercrime

The need for a new societal dealWill it happen?Where do we go from here?

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First synthesis

An evolving environment

- Unstable

- Unequal

- Unsustainable

- Uncertain

That is: diverse; complex; dynamic; uncertain

Plus: many times devil is in the details

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How to prepare for changes in the environment?

Foreseeable uncertainty (RISK) : prepare/ integrate in

strategyProbability; scenarios; sensitivity analysis

Adapting or anticipating – exogenous context

Intervene / proact – endogenous (or potentially so) context

Absolute uncertainty (UNCERTAINTY) : prepare the

organizaton to endure or be at easy in an unforeseeable

context

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A (sometimes quickly) changing environment

Companies, large or small, cannot ignore it (mainly, nowadays)

In a world without absolute certainty, life depends upon probabilities

Chances of surviving increase with information, knowledge, capacity

to understand

BUT, a tennis player who discusses with the umpire and keeps on

looking to the scoreboard or the espectators, rather than to the ball,

will lose the point

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The times they’re a changin’

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The times they’re a changing – the example ofJeff Bezos

First, ignore; contestAnd then (September 2018)

And also (October 2018)

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A (sometimes quickly) changing environment

Companies, large or small, cannot ignore it (mainly, nowadays)

In a world without absolute certainty, life depends upon probabilities

Chances of surviving increase with information, knowledge, capacity

to understand

BUT, a tennis player who discusses with the umpire and keeps on

looking to the scoreboard or the espectators, rather than to the ball,

will lose the point

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Just in case you forgot…

“The right product markets, technology, and geography are critical components of

long-term economic performance. Bad industries usually trump good

management, however: in sectors such as banking, telecommunications, and

technology, almost two-thirds of the organic growth of listed Western companies

can be attributed to being in the right markets and geographies. Companies that

ride the currents succeed; those that swim against them usually struggle.

Identifying these currents and developing strategies to navigate them are vital to

corporate success.” (McKinsey, 2010)

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An application - footwear

POLITICAL / LEGAL ECONOMICAL SOCIO / CULTURAL

TECHNOLOGICAL

A simpler (?) exercise – besides megatrendswhat matters most?

The Economic Dimension - detail

Porter’s 5 forces model for industry analysis

TraditionallyWhat industry?What market?

Blurring of industry boundariesWhat ecosystem?

Still,…

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Source: Besanko, et al. (20125 forces by Porter, himself: https://www.youtube.com/watch?v=mYF2_FBCvXw

Porter’s 5 forces model for industry analysis

Bargaining power

Bargaining power

Threats/ Barriers to entry

Threats / Differentaition/

Complementarities

OBRIGADOAlberto Castro

(acastro@porto.ucp.pt)