Business Model and Strategy
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Transcript of Business Model and Strategy
7/31/2019 Business Model and Strategy
http://slidepdf.com/reader/full/business-model-and-strategy 1/44
A.K. Swain A.K. Swain
6/11/20126/11/2012 11
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Business Strategy: A Cursory View
Strategy viewed as a• Pattern
– Pattern o choices made over time
• Plan –
• Position
– Choices about which products or services are
features
• Perspective
– Choices about how the business is conceptualized
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Business Strategy vs. IS Strategy
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Por t er ’s Value Chain Model
Legal, Finance, General ManagementFirminfrastructure
SUPPORT ACTIVITIES
SkillsDatabase
Human resourcemanagement
Online linksProcurement
development
Computer Aided design
and manufacturing
Service
Service
Marketing and
sales
Outbound
logistics
Operations
Manufactu
Inbound
logistics
to suppliers
promotions
shipping
assembly
handling
delivery
PRIAMRY ACTIVITIESMARGIN
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St ra t eg ic Gr id (Cash, Mc Far lan & Mc Kenney)
High
StrategicFactory(On-line Airline ReservationS stem
Impact on
Business
Turnaround(Application Portfolio with
Support(Batch Billing/financial
eve opment mp as sLow
High
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Fram ew ork fo r Ident i fy ing St ra t eg ic
Com etitor
Strategic Target
Su lier Customer
.
Differentiation
T h
r u s t
Cost
S t r a t e g i c
Innovation
row
Alliance
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IT Value Perc ept ion
IT Dem and: The bus iness need for IT ser v ic es
IT Supply : IT serv ic es t hat ar e de l ivered t o t he bus iness
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Balanc ing Dem and and Supply
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Business and IT A l ignm ent
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Business and IT Al ignm ent : Level 1
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Business and IT Al ignm ent : Level 2
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Business and IT Al ignm ent : Level 3
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Business and IT Al ignm ent : Level 4
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Col laborat ive St ra t eg y
Essence:
How to in ect more diversit and ex ertise into
the strategy process?
EB Model IIMK 15
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Stra tegy
Purpose:
to lead to circumstances in the lon term that are
favorable to profit generation.
EB Model IIMK 16
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St ra t eg y t o Pro f i t
Envi ronment
Resources
Prof i tDa -t o-da
Operat ions
Envi ronment
EB Model IIMK 17
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Profitability
What det er m ines a f ir m ’s Pro f i t ab i l i t y?
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Profitability: Industry Specific
Sl. No. Industr ROE % ROA % 1 Pharmaceuticals 25.87 10.27
2 Chemicals and allied products 21.70 7.88
3 Food and kindred products 24.78 7.25
4 Printing and publishing 16.30 6.68
5 Rubber and miscellaneous plastic 15.07 6.25
6 Fabricated metal products 19.00 5.58
7 Paper and allied products 13.77 4.70
8 Electronics & electrical equipment (no computer) 9.63 4.67
9 Nonferrous metals 10.39 4.23
10 Machinery except electrical 15.69 3.80
11 Petroleum and coal products 13.25 3.76
12 Textile mill products 5.11 3.71
13 Aircraft, guided missiles, and parts 14.02 3.5714 Stone, clay, and glass products 9.16 3.44
15 Motor vehicle and equipment 11.91 3.16
ron an s ee . .
17 Airlines (transportation by air) 2.68 2.05
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Profitability: Industry Specific …. Contd.
m ore pro f i t ab le , on average, t han f ir m s
n ustry xterna actors
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Profitability: Firm Specific
Sl. No Firm (Pharmaceuticals) ROA(%) Sl. No Firm (Airlines) ROA(%)
1 Bristol Myers Squibb 13.71 1 Southwest Airlines 4.58
2 Merck 13.37 2 AMR 1.51
3 Schering Plough 12.89 3 Delta Airlines 1.50
. .
5 Eli Lilly 10.23 5 US Air 0.31
6 Pfizer 9.66 6 America West Holdings -3.27
7 Pharmacia & Upjohn 7.98 7 Continental Airlines -4.97
8 American Cyanamid 3.57 8 TWA -5.37
ort west r nes - .
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Profitability: Firm Specific …. Contd.
t hem t o ou t perfo rm t he ir r i vals?
Firm-Specific/ Internal Factors
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Industry/External Factors
• om pe ve orc es
• Coo erat ive forc es
• Mac ro env i ronm ent
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Firm-Specific/Internal Factors
• os ons o a r m
• Ac t i vi t i es of a f i r m
• Resourc es o f a f i r m
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Determinants of Profitability
Indus t r y Fac t ors• Compet i t i ve Fo rces
• Cooperat i ve Forces
• Mac ro Env ironmen t
Fi r m -Spec i f i c Fac t ors
Ac t iv i t ies Posi t ionsResources
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BM Representation
I ndus t ry
Ac t i v i t i es
Resources
Posi t ions Prof i tab i l i t y
Costs
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Deals with Two Issues
a. How to implement a new strategy?
b. How to translate them into new structures,processes and day-to-day activities?
This missing link is called a business model.
EB Model IIMK
27
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Business Model-Definition
It is a re resentation of a firm’s underl in
core logic and strategic choices forcreatin and ca turin value within avalue network.
b. How a business works
EB Model IIMK
28
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Business Model- Definition.. Contd..
A business model describes the rationale
of how an organization creates, delivers,and ca tures value.
Osterwalder and Pigneur, 2010
EB Model
IIMK 29
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Strategy vs. Business Model
• Business model refers to the logic of the firm,the way it operates and how it creates valuefor its stakeholders
• Strategy refers to the choice of businessmodel through which the firm will compete in
.
EB Model
IIMK 30
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Business Model: Deals with
• Strate ic Choices
• Value Creation
• Value Deliver
• Value Network
EB Model
IIMK 31
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Business Model: Components
• Concrete Choices
• Policy Choices• Asset Choices
• Governance Choices
• Consequences of these choices
EB Model
IIMK 32
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Osterwalder and Pigneur BM Building Blocks
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Osterwalder and Pigneur BM Building Blocks
KA
CS
CR
KR
VPCHKP
CS
O ld d Pi ’ BM C
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Osterwalder and Pigneur’s BM Canvas
E l 1 G l ’ BM C
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Example 1: Google’s BM Canvas
E l 1 G l ’ BM C
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Example 1: Google’s BM Canvas.. Contd…
E l 2 Vi C d’ BM C
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Example 2: Visa Card’s BM Canvas
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Business Model: Example
R anair: The World’s Chea est Airline
It is Europe’s first low-cost carrier and successfullycompeted with the subsidized national carriers. - -
and point-to-point frequent flights, and no in-flight
meals, business class and landings at main, congestedairports.
u u
EB Model IIMK 39
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Business Model: Example
Features of the business model
Choices ConsequencesSecondary airports Low airport fees
owest t c et pr ces arge vo ume
Low commissions to travel agents Low cost
Standardized fleet of 737s Bargaining power with suppliersSingle-class Economies of scale
High-powered incentives Attracts combative team
No meals Faster turnaround
Nothing free Additional revenueSpartan headquarters Low fixed cost
No unions Flexibility in rostering staff
EB Model IIMK 40
Business Model: Ryanair
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Business Model: Ryanair
EB Model IIMK 41
C
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Tactics: A Concept
• It refers to the residual choices o en to a
firm by virtue of the business model itchooses to em lo .
EB Model IIMK 42
S B i M d l & T i
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Strategy, Business Model & Tactics
Tactics stageStrategy stage
Stage 1 Stage 2
Firm chooses thebusiness model
through which it
Tactical Choices
Made from amongstthose available
intends to compete depending onbusiness modelchoice at first stage
EB Model IIMK 43
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The ENDThe END
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