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Motivation People Interaction OB Module 1 Information Random sample QM Stratified Data Confidence interval Macro Markets EC future predicted for rational choice Strategy in business context Marginal analysis Strategy formulation detached from everyday mngt. Product characteristics forgo short-term profit for long-term advantage Market demand Marketing Planning appr. proposed strategy capable of being managed Competitive advantage CEO knowledge or power to choose Comparing profitability Analysis -> strategy decision without FIN feedback from environment = failure Analysis Implementation seperate precess after strategy agreed Resource allocation 3 planning approaches AC Managers can handle only limited no of options Efficiency Managers biased in interpretion of data Seek satisfactory not max profitable solution Constantly changing enviromnet Emergent strategy Org is a coalition of interest groups Strategy is dynamic # static Dynamics Company culture/policies = resource Success strategy need for restructure due available + external factors to loss of comp. advantage Available internal resources profit in the past Resource based strategy Search for comp advantage Comp. preasure How well are we performing Total Quality Management (TQM) development of new prod. The overall view Systematic approach - continually adopted Carry on Structure proactive style attack existing markets What should we be doing in the future Strategic planning make choices not by random combine expansion & diversification Process of strategy & decision making Do not confuse rigour with number High degree of comp advantage precision is not essential Improve resource planning Analysis relative orders of magnitude Improve market intelligens & economic analysis How can we achieve succesful changes Data expressed as positive or negative better control systems for monitoring performance Bring together business concepts & Elements of strategic planning quantitative of qualitative Communicate company goals -> culture ideas in order to understand how companies operate in a competitive Vision Day to day press/problems first Integration environment, develop understanding Specific recommendations in 1 area affect others Cash flow of the inter relationship involved -> basis for conclusions for monitor performance external shocks Evaluation Strategy & crises success/failure + environment relevant measures! Loss of key personell scanning Cost overspending react and learn Feedback labour relations strategy must be aligned with actual events What are the market? process implementation - better understanding Which segment ? SBU product level Company Overall sence of direction Competition? Benefits of SP reduce conflicts Can comp advantage be achieved? understanding Comp bidding Individual Allocation company resources enhance prestige and career prospects SBU value added ratio Divisionalisation Business Unit and Corporate strategy Diversification Portfolio planning Restructuring Dev. of corp strategy Core business Parenting advantage Globalisation - 11/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang Page 1 of 1
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Module 2 Single prod company Small / Entrepreneurial Owner = manager Benefits Gives structure Simplifies complex Owner = manager processes Checklist ID conflict of interest Integrated vertical integrated = specialised func. org. Evolution of company Functional model Multi-product company Potential investments formalised mngt systems Diversified Strategits, entrepreneour & goal setter Who Drawbacks Mechanical process To rigid decides to do what reactions to external/internal changes SBU decide prod & mrkt mix -deminish the natural & dynamic process Corp strategy cannot alone come from a ID new strat manouvers model Quantitative - market share, profit etc. Collection and analysis of info 1. Setting goals Qualitative - quality, customer satisfaction etc. Changes in int/ext environment Analyser & competitor Analysis & design Strategists - mngt roles (round Survey Select important and critical info 2. Forecast payoffs boxes in diagram) Often low priority Strength + Opportunities Analysis & design Mngt consulted most of the times 3. Forecast shortfalls Modelling the strategic Strategy decision makers Choices Weakness + Threaths ID & analyse different alternatives before decision planning process 4. ID potential strategies Simple Strategic model make it happen when decision is taken 5. Select best strategy mix Implementor & controller Allocate resources Id critical succes factors evaluate & control resource use 6. Org and implement resource allocation survailiance of internal & external environment theory & reality is different 7. Control & reappraisal Does not follow theory back to stage 1 leads to continious strategic planning research on managers Use verbal sources not documented 8. Feedback Some reflective other doers SP - multidimensional role and many levels An attempt to rationalise the How is the function undertaken - improvement complex process of company decision making where connection between cause and effect is obscure Mod 2.mmap - 30/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang Page 1 of 1
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relevant Credible Achievable happiness & quality Profit /ROI Liquidity / solidity cost benefit analysis Quanifiable & non-quantifiable productivity Visualise in terms of trade-offs sometimes indistinguishable from mission statement Control all stages? - productive scope Agency problems? maximising shareholder wealth Aggregate objectives Module 3 Control distribution and marketing Defines the business channels? - market position value to stakeholders Where compete? - breadth and focus Achieve ROI stand alone or mix - target markets Means Corporate objective Develop mission statement - corp level Clearly understood by all Provides focus Constraints Objectives Disaggregate Sales objectives Quality of products From vision to mission production objectives SBU objectives degree of differentiation Deriving the mission statement OBS - conflicts between SBU managers objectives geographical area to serve Objectives & incentives must be incorporated consumer segment to target principal / agent problems modified & applied to SBU level What to achieve? Disaggregate the mission - SBU/functional level align SBU focus with overall How to do it? Means & ends measurable targets What and How are different Derive objectives accountability Must be related to market conditions Effective interpersonell process improve Difference between expected & desired outcome chance for success behavioural vs Economic/Financial objectives know the external to react/proactive No right or wrong Internal or external factors? Internal resource allocation Complementary GAP concepts Company objectives "What ID critical success factors are we trying to achieve?" Resources to close the gap? What is being maximised Diminishing returns Develop strategy to close the gap? Incentives Economic objectives Bounded rationality - satisficing (hurdle rate) Attention to long-run profits Shareholders Quantify profit max objectives Managers present value Employees NPV Suppliers Capital sum = Income stream / interest rate Stakeholders different + Customers Capitalised value conflicting interests Creditors Risk free rate Local community Risk premium equity or debt? Government Cost of capital non-diversifiable mapping stakeholders Which is most important - (How it should be) Who has Influence ROI most influence - (how it is) Objective content proirity Shareholder wealth = exp income / interest rate Financial objectives Ultimate test of strategy Code of ethics 1. decide planning period Bribery immoral or acceptable Ethical considerations 2. determine cost of capital moral -> honesty/integrety/dependable 3. decide residual cash flow after planning period loyalty? 4. Cash flow in planning period Shareholder wealth 5. NPV CF 6. calculate PV of residual CF 7. add (NPV + capitalised residual value + marketable securities) - debt Alternative method = Market Value Added (MVA) Friedman - lead to misallocation of resources Social objectives No efficiency criteria - 30/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang
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Module 4 general awareness Political Total market x market share x price = Revenue Economical macroeconomic influence (no of workers x wage rate) + (units of capital x price) + (units of material x price) PEST demographic composition = Cost Social The basic model attitudes Environmental scanning Understand underlaying causes give course of action changes Individual circumstances technology Determining factors speed General state of economy Predict changes Business cycle attempt to investigate implications of possible futures Distinguish internal / external Scenarios Not a forecast Change -> opportunities / threaths? reasons to understand Interpret predictions What is likely to happen? basis for strategic actions direction of change is important Structual leading indicator exogeneous shocks - unpredictable unknown friction Unemployment rate Forecasting When loosing predictive power? demand related Economic info general trend over time Consumer spending Business cycle underlaying smooth cycle Industrial output random fluctuations Correct strategy & timing goals & services produced Supply & demand method of systemising Potential vs actual GNP 1. use PEST as checklist Stagflation 2. apply macroeconomic ideas Phillips curve movement or shift Company & economy (macro) ETOP Part 1 Enironmental Threat Change in expectations 3. consider international factors Full employment = bottleneck -> increased cost Understand / use economic info & Opportunity Profile 4. use environmental scanning Sticky wage rates 5. do scenarios (corrolation of last year x last year inflation List relevant factors, analyse positive / rate) - (corrolation demand of change x Workings of the economy negative impact Determine relative unemployment rate) = Wage inflation rate importance & rank Unemployment & inflation (corr x inf.rate last year) - (corr x unemploy International rate + % cost from last year x last years Foreign wage infl. rate Macroeconomic = Inflation rate ETOP part 2 Microeconomic Current unemployment rate - demand pull Socioeconomic Wage infl.rate = prod cost increase ( cost push) Domestic Market Last period infl. rate x expectations Suppliers relative inflation rates exchange rate fluctuations GNP elasticity (responsiveness) International economy relative interest rates resession - threath capital flows Implications for sales & revenue revenue & GNP growth expectations growth - opportunity resources NB! individual sectors home nation factors capabilities falling market share Economy & profitability (do scenarios) sustaining comp advantage declining market Competitive advantage of nations Competitive reactions demand conditions decreasing comp price strategy, structure & rivalry = disaster Country or company specific GNP growth = increased cost Inputs & company costs cancel out pot revenue benefits - 30/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang Page 1 of 1
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ecnom ies ofs cale Relative m arket s hare experience effect aggres ive s elling growth build capacity Stage of PLC im proved m argins s tatic reduced m arketing Dog abandon to releas e res ources Qty > Price = elas tic dem and Qty < price = inelas tic dem and profit in niche PLC m aintain m arket s hare -> cas h cow Star bus ines s cycle high m arketing cos t Exogenous s hocks m arket s ize Qustion mark increas e m arket s hare -> cas h cow GNP elas ticity dem and factors how m uch to inves t? Exchange rates BCG relative s hare growth m atrix Portofolio models Incorporates econom ies of s cale price dynamics into product Cash cow m arket s hare higher on experience curve m arketing positioning generate cas h perfect m arket - price decided balance price/m arket s hare = m ax profit s loping curve - choice revenue rem em ber dem and curve Demand curve focus es on long term cos t view m axim is e revenue - PxQ=m ax wrong conclus ions com petitive advantage not all dogs loos e m oney increas ed m arket s hare m ay reduce revenue m arket s hare not all cas h cows generate big incom e NB! com petitive reactions Limitations no econom ies of s cale m oney s pent - increas ed revenue experience effect eroded s hift in dem and curve m arketing expenditure dogs m arket - all am ke profit Change in preferences Lot of res ources over tim e cas h cow always threathened by com petition virtually im pos s ible m ix = optim um portofolio Indus try level - OK es tim ating dem and curve Current prod to current m arket - increas e m arket s hare healthy cynicis m to s tatis tics s trategy current prod to new m arket - m arket developm ent ANSOFF growth m atrix new prod to current m arket - prod replacem ent zero-s um gane new prod to new m arket - divers ification agree to s plit m arket gam e theory price war pos ition & s hape of s upply curve depend n pris oners dilemma production cos ts Shifting s upply curve = change in cos t factors above highly elas tic increas e dem and kinked dem and curve Inelas tic below highlyinelas tic enjoy price war Competitive reactions full of dilemmas s acrifice s hort term revenue increas e dem and dom inant s et price 1. price leaders hip Supply m aintain m arket s hare Strategy level of capacity utilis ation low price to deter entry com petitive pricing 2. lim it pricing elas tic cos t ofincreas eing capacity Driving factors avalability & wage cos t of add em ployees kill others 3. predatory pricing availability of raw m aterials need s ubs taniable cas h reserve potential foreign com petitors Different price for each s egm ent Dem and & s upply analys is im protant for 1. identifiable unders tanding future 2. dem and related P -equlibrium price 3. adequate s ize Markets & prices Interaction of dem and & s upply 4. attainable lack of inform ation - s hipping etc Fluctuations key product characteris tics derive char of target s egm ent m ain determ inat oflong term profit geographic 1. ID im portants egm ent variables us e as benchm ark s ocial ID location of s egm ent process not real life incom e etc. Segmentation perfect com petition profit = opportunity cos t 2. Cons tructs egm ent m atrix MC = MR 3. Analys e s egm ent attractivenes s 4. ID key s ucces s factors Dem and = indus try s tandard Company & market (Micro) What is happening to dem and curve? preceived difference Monopoly What is happening to cos t curve? price com parison product differetiation Ques tions to as k What m arket im perfections do we depend on for our profits us e to derive launch s trategy Other pot m arket im perfections not exploited? m onopoly power Size of m arket res earch pricing Market structure exploiting m arkets Sunk cos t price / incom e elas ticity Structual Control by legis lation / tecit agreem ents diffirentiated by quality Barriers to entry Econom ies ofs cale increas e quality vs exploit it Experience effect non-com m ercial lim it pricing Trans cendent Strategic predatory pricing technical product bas ed Entry cos t are not s unk cos t Contes table (perfect) m arkets Cos tles s exit conceptual us er bas ed Only norm al profit cos t reductions production bas ed gam e theory Oligopoly konked dem and curve m arginal cost value bas ed em ploym ent law perform ance Product quality m onopoly Rule m aking features health & s ecurity reliability s eperate m ngt & owners hip conform ance Role of government 8 quallity dim ens ions Internalis e the externality durability Regulating equalis e private & s ocial cos t s ervicability em m is on s tandards & taxes aes thetics overall perceived quality Allocating provis ion ofpublic goods corrolation quality & profitability com p advantage econom ies of s cale TQM Quality & s trategy regulation Barriers to entry can be es tim ated us ing bas ic model Threath of new entrants entry price effect of quality Technology factors inves ting in capacity product char approach & techology proces s m arketing introduction Threaths ofs ubs titutes reduction in total m arket s ize negative cas h flow Monopoly - trade unions etc increas e capacity Structural analysis of industries Suppliers bargaining power large enough to act as m onopoly ID and profile Monops ony firs t m over advantage growth aggres ive m arketing 4 s tages price elas ticity m atch capacity / dem and Incom e elaticity protect m arket s hare m aturity Buyers bargeining power Inform ation - acces s Product Life Cycle reduce m arketing / s ales cost Brand identity Buyer groups exit or phas e out decline no new inves tm ents no of com petitors Intens ity s een in context of bus ines s cycle Indus try com petitors rivalry pos s ible s egem ntation & differentiation im portant to define arkets s ubs itutes Not direct com petiors Strategic groups technology ID groups - find clos e & dis tance com petitors durability & replacem ent International Foriegn m acroeconomic ETOP part 2 Microeconom ic Socioeconomic Dom es tic m arket Suppliers - 11/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang
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Module 5 - part 2 International Foreign macroeconomic 13. ETOP part 2 Microeconomic Socioeconomic Domestic Market economies of scale Suppliers Relative market share experience effect 12. Strategic groups Not direct competitors aggressive selling ID groups - find close & distance competitors growth build capacity Stage of PLC improved margins employment law static reduced marketing monopoly Rule making health & security abandon to release resources Dog seperate mngt & ownership profit in niche 11. Role of government Internalise the externality maintain market share -> cash cow Star Regulating equalise private & social cost high marketing cost emmison standards & taxes increase market share -> cash cow Qustion mark provision of public goods how much to invest? Allocating BCG relative share growth matrix economies of scale 6. Portofolio models Incorporates higher on experience curve Cash cow dynamics into product economies of scale positioning regulation generate cash Barriers to entry Threath of new entrants entry price balance price/market share = max profit remember demand curve Technology factors focuses on long term cost view wrong conclusions product char approach & technology process Threaths of substitutes not all dogs loose money reduction in total market size not all cash cows generate big income Monopoly - trade unions etc no economies of scale Limitations 10. Structural analysis of Suppliers bargaining power industries ID and profile Monopsony large enough to act as monopoly experience effect eroded dogs market - all make profit price elasticity cash cow always threathened by competition Income elasticity Company & market (Micro) Part 2 mix = optimum portofolio Buyers bargaining power Information - access Current prod to current market - increase market share Brand identity current prod to new market - market development strategy Buyer groups ANSOFF growth matrix new prod to current market - prod replacement no of competitors Intensity new prod to new market - diversification Industry competitors rivalry possible segmentation & differentiation position & shape of supply curve depend on production costs Shifting supply curve = main determinant of long term profit change in cost factors use as benchmark increase demand Inelastic not real life enjoy price war perfect competition profit = opportunity cost increase demand MC = MR maintain market share 7. Supply Demand = industry standard level of capacity utilisation Strategy What is happening to demand curve? cost of increasing capacity elastic Monopoly What is happening to cost curve? availability & wage cost of add employees Driving factors Questions to ask What market imperfections do we depend on for our profits availability of raw materials Other pot market imperfections not exploited? potential foreign competitors Size of market Demand & supply analysis important for 9. Market structure Sunk cost understanding future Structural Control by legislation / tacit agreements P -equilibrium price Economies of scale 8. Markets & prices Barriers to entry Interaction of demand & supply Experience effect lack of information - shipping etc Fluctuations limit pricing Strategic predatory pricing Entry cost are not sunk cost Contestable (perfect) markets Costless exit Only normal profit game theory price leader ect. Oligopoly kinked demand curve - 30/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang
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Investigation of scenarios investigate potential outcome from course of action Sensitivity analysis ID crucial variables ID unexpected threaths ID combination of circumstances -> success Approx. compare with competitors Benchmarking info from annual reports find/use info for strategic advantage Unlikely to reveal how to get comp advantage ROI - Return On Invest RONA - Return On Net Asset Best alt to foregone ROCE - Return On Capital Employed opportunity cost Module 6 A balance/ trade off NPV & RISK Id potential weakness reduce amount of info ROTA - Return On Total Asset Value Added Does not vary with output Fixed EPS - Earnings Per Share Irrelevant Gearing Ratio Already taken Sunk cost Costs retained earnings not recoverable - irrelevant equity issue to keep flexibility vary with output Cost types Accounting ratios 3 sources Availability constrains strategic capabilities? Finance - future resource allocation (no of workers x wage rate) + (units of take advantage of opportunity capital x price) + (units of material x price) No optimal ratio = outlay Variable loans relevant outlay / output = unit cost Historic cost? replacement cost? marginal cost vary Asset valuation Current book value? productivity vary Accounting - efficiency of past allocation problems CBU inflation adjusted? optimum allocation Diminishing marginal product Which assets leased? marginal prod 1 = marginal prod 2 allocation of resources Factors determining cost competing SBU's Internal analysis Cost & profit Time to recover startup cost compare MC with MR economist MC Payback period MC vs AC alt - discounted payback all cost must be considered accountants AC historical cost only guidance economist exclude sunk cost fixed cost / net contribution per unit Production cost break even = future vs historical cost break even analysis otherwise biased view concentrate on volume output accountant incl. all historical cost focus on factors affecting pot. total sales What external factors affect cost? marginal cost e.g. work & input cost of one more unit "impossible" to disentangle input relevant cost Joint production Marginal analysis MR= sales price of one more allocated cost Activity Based Costing (ABC) price > maginal cost - keep producing revenue maximising maybe irrelevant in decision making Right price market knowledge what are additional expected cost? Framework Average Cost reduced with volume output What are additional expected return Profit maximisation MR = MC econ of scale first mover advantage significant in some industries market leader advantage Economies of scale Experience curve Average Cost reduced from output to date experience curve effect decline with time learning first mover advantage Combination gives first mover advantage in new markets share inputs good reputation Reduced unit cost with no of products R & D spill over effects Economies of scope coordinated strategy ~ synergy diversification success but more often diseconomies Mod 6a.mmap - 30/11/2011 - Rev. 13 - - prepared by Carl Olav Staff / Rune Fjellvang Page 1 of 1
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Similar to ETOP Never permanent Research Continously eroded by competitors Development based upon internal factors - Competitive advantage SAP - Strategic Advantage Profile rankedOpportunities and Threaths for each production Temporary advantage Module 6 B technology & IT marketing erodes faster & faster finance Avoid conflict constant % of sales / cost? value chain connection Misallocation of resources How much to spend High R cost Low D cost Spill-over effect sunk cost economies of scale Big joint production in R & D problem of resource allocation barries to entry Which criteria for id pot product Research and Innovation Result is prototype Strategic assets experience effects legislation Ideas come sporadic & unpredictable market position Must consider opp.cost of R&I expenditure Sustainable? architecture reputation measure Research expend. Definition of Competitive advantage Distinctive capabilities Internal strength Past R expend Core competence Innovation % of sales / cost expend Indicative factors of Research expend Spill over effects architecture power base causal ambiguity core competence Awareness of R & I critical for success Protection uncertain imitability will imitation work? CTO - max quality CFO. - limit budget Internal employees CMO - get product to market CEO - Alt use of resources Strategic architecture Unique relational contracts with: External suppliers/customer last $ on dev < last on profit group objetives differ marginal analysis can marginal benefit be estimated? related activities networks Communicate & compromise ID factors Sensitivity analysis NPV, Risk & uncertainity etc. Potential access to markets Screening ID core through test contribution to perceived customer benefit Incentives 1. Invention Development Short time when difficult to imitate product from prototype rare max 5/6 per compay potential 2. Prototype core competence lead to core products Core competence systems goals, culture, org design priority protection Competence 3. Patent Innovation process Distinctive capabilities good routines 3 levels expense 4. Development Internal analysis R & I & D Mngt & comp advantage Core output resources competitor reaction market share Positioning 5. Launch pool of experience, knowledge & systems Each stage managed effective Link between stage must be effective ID likely benefits Where is synergy effect Questions Must produce at competitive cost Little emperical evidence Wishful thinking What evidence exist One period ahead Hiring / firing cost Reactive Corp mngt. Synergy learning lost Economies of scale Resource management vertical integration PLC Components 2 approaches Capacity utilisation prod launch periods Joint production select planning horizon Proactive Innovative stimulus dev resource plan implications for marketing strategy lack of positive evidence minimize risk mngt risk? Power culture Role culture Diversification value destruction? HRM Incentives economies of scope task culture personal culture add value through parenting Culture problem - principal/ agent problem? synergy economies of scale in-bound logistics benefits merket dicipline operations primary activities out-bound logistics different priorities Buy? marketing & sales Information leakages Costs service transaction cost Vertical integration procurement avoid paying the cost Value chain analysis tech. development avoid paying profit margin Incorrect arguments! support activities HRM avoid high prices - peak demand make? mngt. systems more powerful structure value to the ultimate user balance competitive & cooperative Correct arguments unique to company Incentive to get things right maybe in the linkage formidable principal/agent problem sustainable comp advantage ID comp advantage Strength / Weakness in comp setting Mod 6b.mmap - 30/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang Page 1 of 1
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economies of scope across SBU's 1. Scrutinised company objectives use core competence in new SBU relatedness among assets 2. Evaluated macro environment Utilise core competence, create new strategic asset Structure for rational choice related /unrelated diversification expand pool of competence 3. Analysed market - ETOP 4. Examined company - SAP already exploited may not be possible No automatic course of action Basis for an informed choice competitive legislation Backward protect current market position forward company strengths Essential first step vertigral integration identify potential strategic thrust captive company market opportunities SWOT Does it add value? SAP - Strategic Advantage Profile matching environmental & company recognising unrealised value Opportunities from ETOP charactheristics Strategy variations buying market share = SWOT reduce competitve preasure Acquisitions synergy relatively small performance gaps balancing portfolio markets are mature core competence Increased efficiency Internal weaknesses Just-In-Time JIT Alliances & joint ventures Strategic alliance is a poor substitue for merger unstable finacial history Stability - analysis result Poor economic prospetcs focus on competitive advantage that can be transferred Competitve threat Volatile exhange rates relative factor costs vary by country Perceived cost of change International expansion government protect home industry managers averse to risk productivity varies among countries Diversifying risk Economies move in different pace/steps culture var fundamentally Searching for competencies Module 7 economies of scale Expansion uncertain future - predict with some certainty Experience effect Corporate level complexity strategy concerned with means & ends building advance capacity mangerial motivation remuneration - revenue maximise shareholder wealth stable retrenchment NPV comparison expand Downsizing delayering restructuring PLC resource allocation vs value creation Dogs Retrenchment expand losing money on some customers Overextended markets gap identifies which generic strategy to pursue stable multiple SBU company pursue different retrenchment performance gaps strategies compared to induvidual SBU Gap indicates significant reallocation of Choices among strategies resources to close gap pursue different generic policy sequentially combination concentrate internal or external Opportunity cost product portfolio eliminate dogs select optimum portfolio stars to replace questions marks effective explotation of individual product market focus balanced but linked portfolio achieve comp advantage in a given market Corporate management strategic response to competitors lower unit cost / higher profit economies of generic strategies alternatives scale / experience effect project appraisal complete PLCS Overall cost leadership new ventures Investment process - resource allocation Choose on NPV increase profit by segmentation different achieve comp advantage on chosen product price in each market market share impact on ROI quality type of market to aim at service perceived characteristics differentiation method to achieve relatively low unit cost image SBU level Strategy choice total market, market share & price different not lower cost Porters generic strategies SBU management scenario framework unit cost, contribution avoid confrontation with competitors Cumulative CF & NPV identify niche markets not high volume Project appraisal sensitivity analysis focus on cost or differentiation focus Priority not on market share - Find ID crucial variables unsatisfied customers clarifies pay-offs from different potential courses of action no distinctive strategy relative poor performance no strategy - stuck in the middle subjective probability trade off between return & possible failure confused marketing perspective on risk v attitude to managers of risk new market opportunity prospector uncertainty cannot be quantified because growth by differentiation or low cost Risk & uncertainty analysis future event cannot be foreseen spohisticated internal info systems technical - minimize probability of loss due to risk analyser strategy to cope with a wide variety of scenarios does not enter new markets without info / experience contingency planning strategic response to major unpredictable events decision maker keep options open as long as possible maintain current market position defender mature markets / cash cows External dependence attitudes to risk minimax criterion deals with it as they arise reactor previous strategies possible future disaster - no change generic strategy is MEAN - company performance ENDS managerial perceptions profitability relates to value added by alternatives managerial power relationships principal / agent generic stragey & company performance scientific method & hypotheses testing in no options for conclusions paradox of voting - A better than B better consensus decisions than C better than A - 30/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang Page 1 of 1
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affects power structure reseacrh & development 1. get the big picture right production, marketing functional Strategic planning works 2. Direct resource accordingly Finance, accounting 3. remember Sir William Burrell & steamships Easier to measure profitability than functional Divisional be aware al all time competitve position Principal / Agent problem matrix unit cost lack of direction & control & focus organisational structure Resources & structure integrate models competitive reactions scale & scope market share transaction cost balance of trade-offs between integrate process modell - analytic agency cost ideas/models - structure - competitiveness information flows assessed applying strategic models & ideas Id areas where company is particularly strong / weak objectives id areas which have contributed to success or failure competitive environment method of resource allocation relevant for Module 8 Analysing the ongoing strategy competitive position external competitive market scan general environment for changes analysis & diagnosis internal cost structure more than investing, retooling & hiring survey feedbacks responsive to change management of change team building but also change what people do pursued as originally intended? confrontation & transactional analysis Choice still appropriate? A structured approach coupled sequential network of events to ID "critical path" with id of relevant models is the align chosen strategy with subsequent events events which must occure key to strategic insight - THE company structure & resource allocation Critical success factors MOST IMPORTANT LESSON alignment things which must be done implementation & feedback felxible enough ? must understand avaiable resources & reaction of change to change attitude to change hierarchical company approach to leadership willingness to listen to information democratic 1. Company adaptability admit mistakes & be proactive management skilss - match requirements management style for strategic change part of culture - cannot change quick GAP analysis of management skills - Feedback Implentation plans upward and downward planned and current org. requirements 2. Company communications what is the most appropriate structure no budget constrains exist able to learn from past experience? market disagree with company projections 3. Company learning re-invent the whole each time poor track record unwilling to reveal strategy - comp situation unable to raise money select a few appropriate objectives strategy difficult to define 1. decide what to be measured Corporate derive suitable targets budget constraint likely benchmark Id profitable budget allocations Budgets Identify suitable milestones resource allocation 4 steps 2. decide how to measure early warning across the board budget limit Finance techniques short term only capital rationing subjective evaluation cut training, research & maintenance 3. Interpret outcome Not share holder wealth! 4. convert into policies few guidelines distribute investment to different functions achieve planned sales efficient use? SBU adjust plan monitoring market performance reward for adding value ivestigate different scenarios based on additional market information barrier if not aligned Incentives Evaluation & control depend on how cost is calculated use incentives to implement change profit depend on how overhead is included Is MR > MC ? Is add expected net revenue > add how effective input is converted to output expected cost ? sale from inventory marginal analysis economies of scale net contribution not necessary a good indicator vary over PLC lower unit cost how much can be sold experience effects higher sales setting sales targets BCG for variations by products monitoring profitability matrix approach - powerful tool Scenarios sensitivity analysis all outflows & inflows opportunity cost aggregate view of profitability ultimate constraint on operations is target market share available cash cash flow efficient use of resources Not short- term profit prod & marketing effective communication between departments resource planning undependable measure of profitability JIT reduce inventory cost mod 8.mmap - 30/11/2011 - - - prepared by Carl Olav Staff / Rune Fjellvang Page 1 of 1
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Statement of the problem Exam approach - SP Factors causing the problem Effects of the problem General context Examination of possible solutions and their implications Conclusions Recommendations Appendices 1. State subject the essence of the problem 2. Summary of recommendations 3. Intriductions main diagnostics of organisation, economic environment main problem sub problems 4. Objectives Id company objectives 1. problem identification Immidiate actions limitations / demarcation only relevant numbers simplfy raw numbers Find info check numbers Analyse internal factors - Strength / weakness - SAP Use of data make table simple Solving case Research, Dev, production marketing, Finance use graphs economic indicators use summary measures Analyse external factors - Opportunities & threaths- ETOP Structure for solving cases releationship within org? 2. Working with the problem org behaviour 2/3 important for each area Situation analysis - Summary of SWOT Strategy report economic economic climate, O & T ID and select alternative model/tools Account for different alternative strategies segmentation & differentiation 5. Analysis market characteristics Discuss - pros / cons - different alternative strategies marketing Analysis Short / long term Recommendations 3. Problem solving finance what contribute to value creation (currently) Contingency planning Conclusions current resource allocation accounting statstical techniques for analysis market quantitative methods ETOP Integration SAP SWOT fit between company potential & market opportunities exan.mmap - 30/11/2011 - Rev. 18 - - prepared by Rune Fjellvang Page 1 of 1
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