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WK7 Agenda• News: Safari World Cup, World Expo, Chinese

Enterprise and ROI, Lebron• ASEAN MNEs• CCTV: Chinese Enterprise• Wii discovery• Tows matrix discovery• Homework Update, mind map

MIB, BBA 2010

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Wii Discovery

• Wii game, meet all teams.• Do your team have a competitive advantage?• Resources+capability+competencycompetitive advantage

• SWOT of your team? Strategy use?

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Alternative Strategies• Find news, video clip, article or reality role play of these alternatives. • Ask your friends what strategy that your team use as well as the

probability of success.

Internal and external factors

Strengths Weaknesses

Opportunities SO: -Use strengths-Take advantage of the opportunities

WO: -Overcoming weaknesses-Take advantage of the opportunities

Threat ST: -Use strengths-Avoid threats

WT: -Minimize weaknesses-Avoid threats

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Homework & Mind Map

• Mind map, check understanding• Is Oishi an MNE?

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WK7.2 Agenda

• Hot topics: World Expo• AHA, our discovery moment• Mind map• SWOT homework and evaluation

SWOT Evaluation• Rate team work of SWOT homework (1-5). Give necessary comment.

Criteria Ed Team Ning Team Big Team

Concepts•External•Internal

SWOT Make sense? Right key success factor?

Team workHow do they work together?Responsibility, amount of work, result of the work, synergy, presentation

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WK7.3 Agenda• Hot topics: Lao Timber, Telecom Industry

growth, real estate bubble in China, labor work situation in Thailand, Cambodia day of anger?

• SWOT homework continue• Lecture

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Strategy Formulation • Situational Analysis: SWOT analysis• Strategy=opportunity/capacity (only strength and

opportunity)• Strategic alternative=O/(S-W), what’s the minimum number

that we’ll be happy?• Should we invest more in our strength to create a distinctive

competence?• Should we invest more in our weakness to at least make them

competitive?• SWOT criticism: lengthy list, no weight to reflect priorities,

ambiguous words, same factor in two categories

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Strategy Formulation• Find a niche using Strategic

Factors Analysis Summary (SFAS) matrix.

• List the most important items for each factor (SWOT) and recreate the matrix.

• The SFAS matrix is the firm’s strategic factors.

• Generate alternative strategies using a TOWS matrix

Internal External factors

Strengths Weaknesses

Opportunities SO: -Use strengths-Take advantage of opportunities

WO:-Overcoming weaknesses-Take advantage of opportunities

Threat ST: -Use strengths -Avoid threats

WT:-Minimize weaknesses-Avoid threat

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Strategy FormulationCorporate Strategy

Business strategy

Functional strategy

• Growth Strategy• Stability Strategy• Retrenchment Strategy

• Competitive Strategy• Cooperative Strategy

• Marketing Strategy• Financial Strategy• R&D, Operation, Purchasing,

Logistic, HRM, and IS

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I.Business Strategies• Focuses on improving competitive position of a company or business

unit’s products or services within the specific industry or market segment.

Business Strategies

Competitive Strategies

Competitive Advantage

Competitive Scope

Tactics

Time Tactics

Market Location Tactic

Cooperative Strategies

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Competitive Strategies• Porter’s Generic

Competitive Strategies– Lower Cost strategy

• Greater efficiencies than competitors

– Differentiation strategy• Unique/superior value, quality,

features, service

• Competitive Advantage– Determined by Competitive

Scope• Breadth of the target

market• Resources+capability+competency

competitive advantageMIB, BBA 2010

Wal-Mart, Dell, Southwest

Benz, BMW,Apple, Bally

Sansabai Buffet, Nunyang

Villa SupermarketBulavi Natural TreatmentSport Club

Can we use both cost leadership and differentiation strategy?

What is stuck in the middle?No competitive advantage,Below average performance

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Risks of Generic Strategies

Risks of Cost Leadership-Competitors imitate.-Technology changes.-Other bases for cost leadership erode.-Proximity in differentiation is lost.-Cost focusers achieve even lower cost in segments.

Risks of Differentiation-Competitors imitate.-Bases for differentiation become less important to buyers: functionality-Cost proximity is lost.-Differentiation focusers achieve even greater differentiation in segments.

Risks of Focus-The target segment becomes structurally unattractive: Demand disappears.-Broadly targeted competitors overwhelm the segment-New focusers subsegment the industry.

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Requirements for Generic Strategies

Cost Leadership Resource Requirement & Skills-Capital investment -Process engineering skill-Intense supervision of labor-Product designed for ease of manufacture-Low cost distribution systemOrganizational Requirement-Tight cost control-Frequent detailed control report-Structured organization and responsibility-Incentive based on meeting strict quantitative target

Differentiation Resource Requirement & Skills-Strong marketing abilities-Product engineering, Creativity-Strong capability in basic research-Corporate reputation for quality or technological leadership-Long tradition in the industry or unique combination of skills drawn from other businesses-Strong cooperation from channelsOrganizational Requirement-Cooperation among departments(R&D, marketing) -Ability to attract high skilled creative people-Need subjective measurement with incentive

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Tactics

Timing TacticsFirst mover advantages: market share, profit, reputation, cost leader, learning curve experienceLate mover advantages: imitate first mover(reduce R&D cost), lower risk, learn from first mover mistakes Proverbs associated with these tactics?

Market Location TacticsOffensive tactics: รุ�กคื�บ-Frontal assault: ตาตอตาฟั�นตอฟั�น-Flanking maneuver: ต�จุ�ดออน-Encirclement:ป่�าล้�อมเม�อง-By pass attack:เป่ล้�ยนเกม-Guerrilla warfare:กองโจุรุDefensive tactics: ต��งรุ�บ-Raise barriers: full product lines, high switching cost, patent, block channel etc.-Increase expected retaliation-Lower the inducement for attack

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Cooperative Strategies• Collusion: reduce output and raise price: OPEC• Strategic Alliances: advantages include: obtain technology, access

to specific market, reduce financial and political risks, learn new capabilities• Mutual service consortia: partnership with similar companies

to share resource(too expensive to develop alone): IBM&Toshiba, Ford&Mazda

• Joint ventures: most popular, but the disadvantages include: the loss of control, lower profit, conflict potential, possible technology transfer

• Licensing arrangements• Value-chain partnerships: alliance with key suppliers or

distributors

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Value chain partnershipMutual Service JV, Licensing

Strong&CloseWeak&Distant

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II. Corporate Strategy

Portfolio Strategy “Coordination of cash flow

among units”

Parenting Strategy “Building corporate synergies through

resource sharing and development”

Directional Strategy “Orientation toward growth”

• BCG Growth Share Matrix• GE Business Screen

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Directional Strategy• Model of Corporate Strategies

Business Strength/Competitive PositionStrong Average Weak

Industry Attractiveness

High

1. Growth Vertical Integration

2. Growth Horizontal Integration

3. Retrenchment Turnaround

Medium

4. Stability Pause or Proceed with caution

5. Profit

Stability(No Change)

6.Retrenchment Captive company or selling out

Low

7. Growth Concentric Diversification

8. Growth Conglomerate Diversification

9. Retrenchment Bankruptcy or Liquidation

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Growth Strategy• Concentration– Vertical growth(forward,

backward integration)• Integration or outsource?

– Horizontal growth– Existing Product New Market– Existing Market New Product

Range – KLM&NWA, UBU, S Khon Kaen

• Diversification– Concentric Diversification

• Grow into related industry• Search for synergies• Thai-DanishTropicana JV

– Conglomerate Diversification• Grow into unrelated industry• Concern with financial

considerations• RedbullPiyawet• KaonaSunee

• Probability of success?

FullIntegrationBP, Shell

Taper<50% Self-made

Quasi(partial control)Buy stock of the supplier

Long term Contract

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WK8.2 Agenda• Revised homework on Friday 23, 2010.• Inflated presentation points• Use the slides diagram• Use the strategic audit sheet.• News, article, corporate website, competitor websites

information search.• Bring all your information. Need better understanding of your

business and industry.• Threat~high ratinghandle well • Weakness~high rating???• Lecture• Mind map and Simulation Game/Start download

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Stability Strategy

Pause/proceed with caution

-Time out before go back to growth (restructure, build new facility)-Dell, SME in a niche market

No change-No opportunity-No threat-No new entrants-Small town business

Profit strategies-Nothing new in a worsening situation(sales are declining)-Boost profit by cutting cost in R&D and marketing, or going public(IPO).-Create good image to the shareholders.

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Retrenchment Strategy

Turn around-Highly attractive industry but the company is in a weak competitive position.-IBM

Captive Company-Production only-Save marketing cost-Thai captive companies Sell out/Divestment-Couldn’t be a captive company but can sell the company at a good price to other firms

Bankruptcy-File for bankruptcy to the courts -GMLiquidation-Management decision to sell out all assets

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Portfolio Analysis : BCG• BCG Matrix use growth rate and

relative competitive position.• Relative Competitive position

=market share/mk share of the largest competitor

• The cut off position is at 1.5X. More than 1 means?

• Question marks: new product with potential for success, but need lots of cash for development

• Stars: market leader, peak of the product life cycle, generate lots of cash

• Cash cows: decline stage of the product life cycle, generate cash to invest for question mark

• Dogs: low market share and do not have market potential due to unattractive industry.

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Portfolio Analysis : BCG• What should we do if we have a

dog? • Dog farm…sell out• Limitations include:

– Too simple(use high and low)– Market share does not

always link to profitable– Growth rate is only one

aspect of the industry attractiveness.

– Market share is only one aspect of the overall competitive position.

– Only consider the largest competitor (the divisor) ignore other firms.

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Portfolio Analysis: GE Business Screen

• Industry Attractiveness: Market growth rate, comparable market share, industry profitability, size, and pricing practicesCompetitive position: market share, technological position, profitability, and size

• A-H are the product lines.• Size of the circle represent the

industry.• The highlighted area is the market

share.• Limitations include:

– Complicated and cumbersome– Subjective judgment rating– Not effective for depicting new

product positions

AWinners Winners

B

C

Question Marks

D

F

Average Businesses

EWinners

Losers

GLosers H

LosersProfit

Producers

Strong Average Weak

Low

Medium

High

Business Strength/Competitive Position

Indu

stry

Att

racti

vene

ss

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Parenting StrategyDeveloping a corporate parenting strategy

– Examine the business unit strategic factors– Examine the business unit to improve performance– Analyze the characteristic fit between parent corporation

and the business unit

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III. Functional Strategy– The approach a functional area takes to achieve

corporate and business unit objectives and strategies by maximizing resource productivity.

Top management

Marketing Production Financial HRM R&D Information System

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Marketing StrategyMarket Development for Current Products• Capture larger share for the current products by using advertising and

promotion for market penetration. P&G, Unilever• New markets for the current products. Redbull

Product Development for New Products• Develop new products for existing markets.• Develop new products for new markets.• Use a successful brand name to market other products is called line extension.

Promotion&PlacePush products through the distribution channels by giving discounts, in-store special offers and advertising.Pull the products through the distribution channels by building brand awareness.

Price• Skim pricing: high price for new product when you have few competitors• Penetration pricing: low price to grab market share and use experience curve• Dynamic pricing on the internet: prices vary upon demand, segment, and availability

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Financial Strategy• Leverage buyout: acquire the company with the

borrowed money from the third party organizations.• Reverse stock splits: each share is worth only half

as much to raise the stock price• Tracking stock: Common stock issued by a parent

company that tracks the performance of a particular division without having claim on the assets of the division or the parent company. The objective is to separate a high-growth division from a larger parent company.

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R&D Strategy

Technological leaderCost advantage: -1st lowest cost production design-1st down the learning curve-Create low cost ways of performing value activitiesDifferentiation: create unique or innovative products to increase buyers’ value

Technological followerCost advantage:-Lower the cost by learning from the leader’s experience.-Avoid R&D cost.Differentiation:-Adapt the product or delivery system more closely to buyers’ needs by learning from the leader’s experience.

Open innovation-A firm uses alliances and connection with corporate, government, and academic labs to learn about new developments.-Cross pollination

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Operation Strategy1. Job shop: skilled labor2. Connected line batch flow: components

are standardized3. Flexible manufacturing systems: parts are

grouped into manufacturing families to produce a wide variety of mass-produced items

4. Dedicated transfer lines: highly automated assembly lines, use little human labor

5. Mass production: produce a large number of low cost, standard goods and services

6. Continuous improvement system: improve production process, manager is a coach

7. Modular manufacturing: JIT to a company’s assembly line

Mass productionmass customization: DellSix sigma MIB, BBA 2010

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Purchasing StrategyMultiple sourcing

• Competitions among suppliers reduce purchasing cost

• Supplies are always on hand when needed

• If accepting the lowest bid usually compromise with quality.

Sole sourcing

• Obtain high supplier quality

• Buyers should work closely with supplier.

• If the problem incur, it would delay the production process.

Just-in-time (JIT)

• Parts arrive at the plant just when they are needed (no inventories).

• JITII: in house suppliers to do the order, attend production meetings, visit R&D lab, sales forecast: Bose, IBM, Honeywell

Parallel sourcing

• Two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each other’s part.

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Logistics Strategy

• Synergies across business units

• Bargaining power with shipper

Centralization

• Reduce cost• Improve delivery

time

Outsourcing

• Online tracking• Order monitoring• No phone call

error

Internet

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HRM Strategy

Teamwork increases

higher employee

satisfaction and

commitment.

USE 360 degree

performance appraisal.

Have diversity in team

(different race, nationality,

and age).

Other Trends-Temporary employees-Low cost(low pay, low skilled, repetitive job, short term)-Differentiation (skilled employees, high pay, self manage work team, complicate work)

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Information Strategy

• Key driver of a business.• Must align to the

company vision and satisfy the business need.

• Support better business decision.

• Balance cost, convenience and security.

• CRM, EDI,ERP, SAP, SAS, E-commerce etc.

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Strategy to Avoid• Blindly follow the leader: Fujitsu follow IBM in

maturing mainframe business• Hit another home run: Polaroid instant movie

camera• Arms race: market share fight but the result is

offset by the increase in advertising, promotion, R&D, and manufacturing cost. Chang and Singh

• Do everything: Jump into all opportunities. Disney company increasing sales but decreasing net income.

• Losing hand: Unwilling to accept its failure. Throw good money after bad. Pan American Airlines

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Strategic Choice• Create three

scenarios(Optimistic, Pessimistic, and Most Likely) and cost estimation.

• Select the alternative that use the least resource and fewest negative side effects as well as minimize cost and risk.

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Subjective Factor Affecting Decisions

• Management’s attitude toward risk

• Pressures from stakeholders

• Pressures from corporate culture

• Needs and desires of key managers

• Avoiding the consensus trap– Devil’s Advocate

– Dialectical Inquiry: debate two proposals using different assumptions

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Evaluation of Strategic Alternatives

• Mutual exclusivity• Success: doable, high

probability of success• Completeness: include

all key strategic issues• Internal consistency:

make sense, not contradict key goals, policies, and current strategies

Corporate Strategy

Business strategy

Functional strategy

• What business or industry we should be in?

• How should we compete or cooperate in that industry?

• How to support?

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Mind Map &Simulation

• Prepare the mind map of this lecture.• In 4 groups, download Industry Player. • http://www.industryplayer.com/download.php• Start playing level 1.• What did you learn from this simulation?

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Redo SWOT Homework

• Use the slides diagram• Use the strategic audit sheet.• News and article information search.• Bring all your information.• Need better understanding of your business

and industry.

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WK8.3 Agenda

• Mind map• Group work