1. Strategic Management
Market Dynamics
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-1
2. ETOP
Environmental Threat and Opportunity Profile
Factor Impact Importance Opportunity Threat
Regulatory 3 8 24
Competitive -2 7 -14
External Alliance 7 6 42
Internal Alliance -6 5 -30
Entrepreneurial 4 5 20
Info Highway 5 4 20
Financial 7 4 28
Social 2 3 6
In this ETOP factors are tailored and ordered as to their importance
Regulatory - tremendous opportunity to push for deregulation, led by STPI.
They have had their lesson and learned well
Competitive - AT&T, Sprint
External Alliance - solid, mutually reinforcing, long-term
Internal Alliance - source of friction and reduction of ability to react
Entrepreneurial - Stentor now much more entrepreneurial (all three elements)
Info Highway - mergers and acquisition for cable, cellular, infotainment
Financial - ability to increase leverage through debt
Social - universal access concept, downsizing, leanness all socially acceptable
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-2
3. ETOP: Pros and Cons
Pros Cons
• Help to determine the key • It doesn’t show the
factors of threats and interactions between factors
opportunities • It can’t reflect the dynamic
• Good tool to qualify the factors environment
related to company’s strategy • It’s a subjective analysis tool
• Can consider many factors for
each special case
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-3
4. Porter Competitive Analysis
5 Forces Model of Competition
FIRMS IN OTHER
FIRMS IN OTHER
INDUSTRIES OFFERING
INDUSTRIES OFFERING
SUBSTITUTE PRODUCTS
SUBSTITUTE PRODUCTS
RIVALRY
RIVALRY
SUPPLIERS AMONG
AMONG BUYERS
SUPPLIERS COMPETING BUYERS
COMPETING
SELLERS
SELLERS
POTENTIAL
POTENTIAL
NEW ENTRANTS
NEW ENTRANTS
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-4
5. Porter Analysis
Substitutes
Substitutes
Suppliers
Suppliers Market Customers
Customers
Market
New Entrants
New Entrants
Horizontal Forces mature markets
Vertical Forces growth markets
Vertical and Horizontal competitive and changing markets
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-5
6. Porter Competitive Analysis - Wal-Mart
Discount Retailing
Discount Retailing
New Entrants
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-6
7. Porter: NTI
Sat. Tech.
Sat. Tech.
Telephone or
Multimedia cost?
Suppliers AT&T
AT&T Baby Bells
Suppliers NTI Baby Bells
NTI
Siemens Low cost producer
Siemens
NEC
NEC Financial strength
Growth market
Price focus of customers - close to maturity
Strategic Factors: Flexibility, enhancement, uniqueness (product/service
combination), combine with GVA, new Porter needed?
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-7
8. Porter’s Five Forces: Pros and Cons
Pros Cons
• It’s a good tool to identify the clear • It often produces the same
competitive environment and the recommendations for similar
relationship for the five market forces organizations
• It is an useful analysis model for the • It assumes relatively static
new entrants and the existing market structures.
competitor inside the market • It provides a good framework
• It helps the company design for analysis but does not really
competitive strategies and make right consider issues around
decisions implementing changes to
• It surfaces the inverse relationship reposition for strategic
between profit margin or returns and advantage.
the intensity of competition • It can’t show how a company
• It provides useful inputs for performing performed relative to its
other analysis competitors
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-8
9. Porter Competitive Analysis - Wal-Mart
Potential rate of growth in industry
Ease of entry of new firms into industry
Intensity of competition among firms
Degree of product suitability
Degree of dependency on compl. Or supporting prod & srvcs
Degree of bargaining power buyers and customers possess
Degree of bargaining power suppliers and vendors possess
Degree of technological sophistication in industry
Rate of innovation in industry
General level of management capability
0 1 2 3 4 5 6 7 8
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-9
10. Competitive Environment Analysis
1. Potential rate of growth of industry (in real terms)
0-3% ___ 3-6% ___ 6-9 % ___ 9-12% ___ 12-15% ___ 15-18% ___ 18-21% ___ >21% ___
2. Ease of entry of new firms into industry
No barriers- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Virtually impossible to enter
3.Intensity of competition among firms
Extemely competitive- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Almost no competition
4. Degree of product substitutability
Many substitutes available- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -No substitutes
5. Degree of dependency on complementary or supporting products and services
Highly dependent-___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Virtually independent
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-10
11. Competitive Environment Analysis
6. Degree of bargaining power buyers and customers possess
Buyers dictate terms- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Selling firms dictate terms
7. Degree of bargaining power suppliers and vendors possess
Suppliers dictate terms- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Buying firms dictate terms
8. Degree of technological sophistication in industry
High-level technology- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Very low-level technology
9. Rate of innovation in industry
Rapid innovation- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Almost no innovation
10. General levels of management capability
Many very capable managers- ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ : ___ -Very few capable
managers
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-11
12. Competitive Sustainability Analysis
Class Product
Class 1 - Slow Cycle Resources Marlboro’s
KSF: nurturing of protected market,
defending and building the brand
Class 2 - Standard Cycle Resources Lesser Brands
KSF: Economies of Scale
Market share/control
Building product loyalty
introducing new products to attack leader’s brand
Class 3 - Fast Cycle Resources Financial Products
KSF: market timing and intelligence
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-12
13. Strategic Map - Industry
High
Price Club
Diversification
Wal-Mart
K-Mart
Sears
Low
Low High
Competitive Capability
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-13
14. Strategic Map - Industry
AECL - CANDU
High Westinghouse
$288M General Electric
Siemens $4,303M
Diversification
$1,792M
Framatome ABB
$984M $590M
AECL
Low
Low High
Competitive Capability
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-14
15. Porter’s Diamond
Determinants of National Advantage
Firm, Strategy,
Structure, and
Rivalry
Factor Demand
Conditions Conditions
Related and
Wal-Mart Supporting
Industries
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-15
16. Industry Value Chain
PC Industry
Intel PC Makers Microsoft
Chips Hardware Software
Value captured by each player
•value captured by neighbours influence competitive
dynamics of PC makers
•Intel & Microsoft capture high % of value
•PC makers are squeezed and are forced to compete on
volume because of low margins
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-16
17. Economies of ‘S’
• Scale (inputs,throughput, outputs)
• Scope (production, technology, marketing, channels, core,
competencies/capabilities)
• Strength (relative market share, branding power, shelf power)
• Structure (market/product linkages,decision flow, value chain
management)
• Speed (response time to market, product cycle time rate of
technology absorption)
• Strategy (optimal/minimal changes, Strategic design criteria)
• Synergy (association with clusters, joint ventures, strategic
alliances, coopetition)
• Span (ability to focus on business: functional similarity,
geographic dispersion, functional complexity,
need for direction, need for coordination, planning
demands, managerial help)
• Sales (learning curve, experience curve)
• State (organizational / product / production lifecycle)
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-17
18. Economies of ‘S’
Market Phase
Economy (input based, budgets)
Organization Effectiveness Administration
(output based) Mgr
Entrepreneur Efficiency (throughput based)
Market Push (cost leader)
Mature
Market Pull
Market Phase (focus) Competitive
Intro Market Test (differentiation)
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-18
19. Key Success Factors - Giant Tiger
Niche market: Good value for $
Distribution channel cross docking
Good financial position
Flexible experienced buyers
Main street locations
Franchisee relationship
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-19
20. Key Success Factors - Cross Keys
Key Success Factors Measures
Corporate credibility: Trade show recognition, speaking
invites, # of RFP’s
Technological reputation: Quality/reliability/performance
Market Share: Revenue growth, # RFP’s
Company morale: Turnover, employee interaction
Recruiting effectiveness: Average # of ongoing vacancies, #
of qualified applicants per vacancy
Productivity: Revenue per employee
Sales effectiveness: Contracts signed per # RFP’s
answered
Marketing effectiveness: Sales team approval, # of leads
Growth management: Turnover, recruiting, productivity,
employee morale
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-20
21. Critical Success Factors - Maclaren Industries
•Quality of product and service
•Ability to compete based on price in weak
markets
•Ability to meet the customer’s recycled content
requirement
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-21
22. Key Success Factors - Mitel
Dynamic product base
Innovation
Address segmentation
Excellent service
Distribution
Be on the short list of suppliers for major customers
Each segment with appropriate channels
Economic value
Copyright by Authors Tom Koplyay and David Goldsmith July 1998 3-22