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WK6 Agenda• News, ASEAN MNEs• Video clips discovery• BBA Strategic audit• Homework

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Video Clips Discovery• What are forces of the changes in the first

two video clips?• What’s the trend? What’s the

industry situation? Thailand?

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Video Clips Discovery• What are their core competencies?• How do these companies make money?• Do these companies have a complete vertical

integration?• Do these companies have a sustainable

advantage?– Durability– Imitability(transparency, transferability,

replicability)• Other meanings for sustainable?

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Environmental Scanning

• In three groups, use the strategic audit sheets(part I-V) to provide a SWOT analysis for BBA programs in three different universities.

• What are the key success factors?• How do we make money?

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Homework

• Select Thai MNEs and do the internet research using the strategic audit sheet to provide a summary– Current Situation(performance, mission, vision, strategy)– Board and management– External environment scanning– Internal environment scanning

• Core competency• Competitive advantage

– Provide SWOT using EFAS, IFASMIB, BBA 2010

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WK6.2 Agenda

• NEWS, ASEAN MNEs• Lecture• Mind map• BBA SWOT• Homework

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Strategy

• Strategic management:• A set of managerial decision and actions that

determines the long run performance of a corporation.

• Strategy:• A master plan to achieve your mission and

objective.

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Strategic Decision Making Process• See the strategic checklist sheet

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Strategy and Structure

Environmental Scanning-External-Internal

Strategy Structure

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Strategy and Structure

SWOT

External Environment

Implementation and Control-Organizational Structure

Internal Environment

Strategic Planning•International strategy•Corporate level strategy•Business level strategy•Department level strategy

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Societal Environment

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Current Trends

• US Current Trends– Increasing environmental

awareness– Growing health consciousness– Expanding seniors market– Impact of the Generation Y

boomlet– Declining mass market– Changing pace and location of

life– Changing household

composition– Increasing diversity of

workforce & market

• Thailand trends– Environment– Health– Politic– Society

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Industry Environment• How will the societal environment

affect the industry environment?

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I. Porter’s Five Forces• Threat of New Entrants• Barriers to entry

– Economies of scale: need larger scale for new entrants, SCG, TPI

– Product differentiation: if no difference should invest in marketing

– Capital requirements: stock market

– Switching costs: difficulty in switching the product, Window

– Access to distribution channels: existing firms are better

– Cost disadvantages for new entrants: existing firms have advantages on patent, learning curve, raw material, and location.

– Government policy: limited by licensing in some industries (banking, fisheries)

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I. Porter’s Five Forces• Rivalry Among Existing Firms

– Number of competitors– Rate of industry growth:

bigger pie with higher growth

– Product or service characteristics: price war for commodity products

– Amount of fixed costs and exit costs: high competition in high fixed and exit costs, pharmaceutical industry

– Capacity: excess supply if full capacity, oil, egg

– Diversity of rivals

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I. Porter’s Five Forces

• Threat of Substitute Products or Services

• Bargaining Power of Buyers

• Bargaining Power of Suppliers

• Relative Power of Other Stakeholders

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I. Porter’s Five Forces• Threat of Substitute: different

appearance and characteristics but can satisfy the same need• Price ceiling of a product is the

switching price to a substitute product.

• Bargaining Power of Buyers: large buyers, many alternative suppliers, backward integration capability, low switching cost, low profit margin, unimportance to final product

• Bargaining Power of Suppliers: Oligopoly, high switching cost, no substitute, forward integration capability

• Relative Power of Other Stakeholders

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II. Industry Life Cycle

• What would happen in each phase?– Number of the

companies– Size of the companies– Strategy– Price

Fragmented Consolidated

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III. Strategic Groups and Types• A strategic groups

– Similar strategies– Similar resources

• Strategic types– Defender: limited product lines

and cost, focus on improving efficiency

– Prospectors: broad product lines, focus on product innovation and market opportunities

– Analyzers: operate in many market areas (stable: efficiency and variable: innovation)

– Reactors: inconsistent in strategy-structure-culture relationship

• Who’s the direct competitor?

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Strategic Factors• Apply to BBA

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EFAS and Industry Matrix• Your external analysis and position in the

industry. How your competitors respond to each factor.

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Mind map and BBA Exercise

• Prepare the mind map for this lecture.• Continue BBA Exercise• Strategic factors• Use the word “BECAUSE” to provide your

supporting reasons. • Example: BBA students are…because…

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Homework

• What industry that you choose?• MNEs?• EFAS and Industry Matrix• Continue lecture for internal factor

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WK6.3 Agenda• News: World Cup(Spain), 3G, new director for

BOT, ladies’ journey, Carrefour, Princess speech

• ASEAN MNEs• Competitive Intelligence exercise• Lecture• Mind map, BBA exercise, Homework update

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Competitive Intelligence Exercise1. Careful study of trade journals. 2. Wiretapping the telephones of competitors. 3. Posing as a potential customer to competitors. 4. Getting loyal customers to put out a phony "request for proposal” soliciting

competitors' bids. 5. Buying competitors' products and taking them apart. 6. Hiring management consultants who have worked for competitors.7. Rewarding competitors' employees for useful "tips." 8. Questioning competitors' customers and/or suppliers. 9. Buying and analyzing competitors' garbage. 10. Advertising and interviewing for non-existent jobs. 11. Taking public tours of competitors' facilities. 12. Releasing false information about the company in order to confuse competitors.13. Questioning competitors' technical people at trade shows and conferences. 14. Hiring key people away from competitors. 15. Analyzing competitors' labor union contracts. 16. Having employees date persons who work for competitors. 17. Studying aerial photographs of competitors' facilities.

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Internal Scanning

Resource based approach-resources

-capabilities-competency

Business model Value chain analysis: examine the chain of

value creating activities starting

from raw materialcustomer

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I.Resource Based Approach• Resources+capability+competencycompetitive advantage• Resources: – Tangible:

• Physical assets: plant, equipment, and location• Capital: credit rating, capital management• Technology: patent, R&D

– Intangible: employees and skills, culture, reputation, brand • Capabilities: ability to use its resources, ability to turn input

into output• Competency: cross functional integration and coordination of

capabilities, use VRIO framework to evaluate its competency– Avon: door to door selling– Wal-Mart: logistic – Oriental Hotel: customer service

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I.Resource Based Approach• VRIO Framework

Value: Does it provide customer value and competitive advantage?

Rareness: Do other competitors posses it?

Imitability: Is it costly for others to imitate?

Organization: Is the firm organized to exploit the resource?

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Resource Based Approach to Strategy Analysis

• Resources+capability+competencycompetitive advantage• Match capability with resource or resource with capability• Which way is easier?

Identify resources as

strengths and weaknesses

Combine strengths into capabilities

(match capabilities with resources)

Appraise profit potential of capabilities

(build sustainable competitive

advantage or core competency)

Select strategy that best exploits

opportunities

Identify resource gaps that need to be filled

Increase StrengthDecrease Weakness

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Sustainable Competitive Advantage• Durability: depreciation rate of the firm’s resources, capabilities, or core

competencies– Examples: Intel, cassette tapecdmp3mp4

• Imitability: duplication rate by others– Transparency: understanding speed of other firms to the relationship of

resources and capabilities supporting a successful firm’s strategy– Transferability: competitors ability to get the resources and capabilities

necessary for the competitive challenge– Replicability: competitors duplication ability, the use of resources and

capabilities to imitate the firm’s success• Explicit knowledge vs. Implicit knowledge Which one is easier to copy?

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II. Business Models• How do these companies

make money in each business model?1. Customer Solutions Model:

IBM, consulting firms2. Profit Pyramid Model: GM3. Multi-Component

System/Installed Base Model: HP printer and ink cartridge, Gillette razor and blade

4. Advertising Model: news paper, dot.com

5. Switchboard Model: ebay, NY material museum

6. Time Model: SONY R&D 1st mover7. Efficiency Model: Wal-Mart, Dell 8. Blockbuster Model: movies,

pharmaceutical companies9. Profit Multiplier Model: Walt Disney10. Entrepreneurial Model: niche

market11. De Facto Standard Model: free for

basic product

• How can we use business model for our internal scanning?

• Do your competitors use the same business model?

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III. Value Chain Analysis• Value chain: • Linked set of value-creating activities

beginning with basic raw material and ending with distributors getting final goods into hands of customers

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III. Value Chain Analysis• The importance or weight of each activity(strength and weakness)

depends on the type of business.• Retail business: logistic, Pharmaceutical or electronic: R&D• How can we use value chain for our internal scanning?• Compare your value chain to the industry key success factors as well as

your competitors value chain.• Examine the company product lines for strength& weakness (divisional

structure). Synergies among product lines (economies of scope)?

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Organizational Structure• Examine the organizational structure before the value chain to see the

availability of resources and capabilities (reverse, 2nd school of thought).• How will the organizational structures be your strengths or weakness? • Specialization, control, command, decision, communication flow

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Other Internal Issues• Corporate culture: identity, commitment,

stability, and employee behavior• Marketing: positioning, segmentation,

product life cycle, marketing mix, brand• Financial: financial leverage, capital budgeting• R&D: R&D intensity(% R&D spending),patent,

publication, new product, technology transfer, technology discontinuity

• HR: teams, temporary workers, quality of life and diversity

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Mind Map & BBA Exercise• How to do the internal scanning?• How can we apply sufficiency economy philosophy with

internal scanning?• IFAS textbook example

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Homework• Industry? Annual Reports? News? • SWOT analysis on Wednesday July 14, 2010• Each team will have to evaluate other teams’

results.