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Capital requirements, technological requirements, brand loyalty, economies of scale Growth rate, level of demand
Pg 37. text book
2. Critical Success Factors (CSF)
3. Matrix Analysis
4. Value Chain Analysis
5. Five Force Analysis
An organization’s fundamental purpose
To formulate strategies that support the mission
Those that support the mission and:
• exploit opportunities and strengths
• neutralize threats
• avoid weaknesses
(the firm itself)
basis forbasis for
• A process of distillation
different people = different
• Critical question : So what ?
• Fact based - no wishful thinking
• Necessary assumptions --> contingency
What makes a good strategic
SWOT Analysis is an effective way of
identifying your Strengths and Weaknesses,
and of examining the Opportunities and
Threats you face.
You can also apply SWOT analysis to your
Strategy tool to help allocate resources
Examines relative market share and
industry growth rate
Defines Four Business Groups
Cash Cow, Star, Question Mark and Dead Dog.
This method is based on the product life
It can be used to determine what priorities
should be given to the product portfolio of a
Boston Consulting Group
High Relative Market
Low Relative Market Share
Stars Wild Cats (Question Marks)
Cash Cows Dead Dogs
currently highly profitable
Not profitable at present but
expected to be profitable in the
Little contribution to profit
currently or in the future
• To ensure long-term value creation, aa
company should have a portfolio of productscompany should have a portfolio of products
that contains both high growth products inthat contains both high growth products in
need of cash inputs and low growth productsneed of cash inputs and low growth products
that generate a lot of cashthat generate a lot of cash.
• The basic idea behind it is that thethe bigger thebigger the
market share a product hasmarket share a product has oror the faster thethe faster the
product’s market share growsproduct’s market share grows the better it isthe better it is
for the company.for the company.
Relative position – market share
Star (= high growth, high market
Use large amount of cash
Leaders in the business so they
should generate large amount of
Attempt should be made to hold
share, result will be cash cow if
market share kept
Question marks – (high growth, low
Worst cash characteristics,
because of high demands and
low returns due to low market
Either invest heavily or sell or
investment nothing and generate
whatever cash it can. Increase
market share or deliver cash
Dogs – (low growth, low market
Avoid and minimise the number in
Deliver cash, otherwise liquidate.
Cash cow – (slow growth, high
Profit and cash generation is high
But, slow growth, so investment
should be low.
Keeps profit high. Foundation of
Porter's Generic Competitive Strategies
in the long run
sustainable competitive advantage
2 types competitive advantage:
low costlow cost
Generic strategies for achieving
above average performance :
Cost leadershipCost leadership
Focus / nicheFocus / niche
A firm's relative position within its industry
determines whether a firm's profitability is
above the industry average or not .
Gain competitive advantage by producing
In cost leadership, a firm sets out to become
the low cost producer in its industry.
A low cost producer must find and exploit all
sources of cost advantage..
Provide unique product to a target market
Organization seeks attributes that many
buyers in the industry perceive as important,
and uniquely positions itself to meet those
Eg. quality of products or services
An organization concentrates on a specific
regional market, product line, or group of
buyers and tailors its strategy to serving them.
cost focus = a firm seeks a cost advantage in
its target segment
differentiation focus = seeks differentiation in its
buyers with unusual needs
We market our existing products to our existing customers.
This means increasing our revenue by, for example, promoting the
product, repositioning the brand, and so on. However, the product
is not altered and we do not seek any new customers.
We market our existing product range in a new market.
This means that the product remains the same, but it is marketed
to a new audience. Exporting the product, or marketing it in a
new region, are examples of market development.
Ansoff's Product/Market Matrix
This is a new product to be marketed to our existing customers.
Here we develop and innovate new product offerings to replace
existing ones. Such products are then marketed to our existing
customers. This often happens with the auto markets where existing
models are updated or replaced and then marketed to existing
This is where we market completely new products to new customers.
There are two types of diversification, namely related and unrelated
Related diversification means that we remain in a market or industry
with which we are familiar. For example, a soup manufacturer
diversifies into cake manufacture (i.e. the food industry).
Unrelated diversification is where we have no previous industry nor
market experience. For example a soup manufacturer invests in the
Ansoff's Product/Market Matrix (cont.)
Five Force Analysis
Model developed by Porter and Millar (1985)
Depict the competitive world in which any
Five Forces Model of Competition
(of firms in
Porter’s Five Competitive Forces
Competitive position is due to Five factors:
1. Threat of new entrants
Extent to which new competitors can enter market
1. Competitive rivalry
Competitive rivalry between established firms in industry
1. Threat of substitute products
Extent to which alternative products/services from other
industries may appeal to your customers
1. Power of buyers
Extent to which buyers influence market rivals
1. Power of suppliers
Extent to which suppliers influence market rivals
PORTER’S COMPETITIVE FORCES
Buyer Increase switching costs by making it more expensive
for buyers to go to other supplier, reduce bargaining
power of buyers, categorized buyer groups
Supplier Reduce the power of suppliers, reduce human labor
by using robotic technology, identify new materials/
Defend market position or penetrate the barriers
others has created around attractive industry. Create
entry barriers; first mover; own data base
Substitutes Determine price performance, switching cost to
decrease buyers from using alternative product
whenever it is available. Enrich product with IS
services; speed up life cycle
Rivalry Collaborative efforts to lower cost/ strategic alliances