¡Descarga Strategic management y más Apuntes en PDF de Administración de Empresas solo en Docsity!
Strategic Management.2/2/ Chapter 9 Analyze the industry life cycle:
- Introduction
- Growth (exponential)
- Maturity, sales start to stop growing.
- Decline, sales are going down. (If have substitutive products it disappears)
1.The introductionary stage:
The industry has just appeared normally related with technological innovation normally it’s unprofitably, but will be profitable in the future. DILEMA product in BCG. Normally is used job shop configuration. Build by request. Buyers: high income, innovative. Uncertainty: a) Technological Uncertainty: Nobody knows what is going to be successful. Network effect: If a product has a big Spread, the people feel that they are in a network and there will be more applications for the product. b) Strategic Uncertainty: New firms exist, these firms have not experience, they have the technology but they could not know how to compete. Instability: In a new industry there is not entry barriers. Any firm that try to enter the market, there could be a disaster there. The customers are trying, so here there is no loyalty at all. The public Powers decide to establish who is going to be the winner. What should firms do?? To avoid uncertainty and instability. 1.Trying to influence the final configuration of the industry:
- Cooperation: Alliance with the other that form the industry(problem of BETA) 2.Choose the right moment to enter the industry:
- Be the first to enter, the leader. You can create barriers, you will have the experience effect. The first supplier’s agreement, the followers will have worst suppliers. Disadvantages: high costs(training costs, advertising), some one could improve your product, risky. Normally followers are more profitable than leaders.
- Enter when success is granted 3.Risk management
- Trying to be financially conservative, should try to use shareholders funds. Avoid credits with high interest rates.
- Try to cooperate with the customers to improve the product.
- Being flexible to adapt to changes in the environment.
The growth stage
The mature stage
The pace of the sales growth is reducing. Sales can be lower or stagnant. Knowledge increases the bargaining power of the costumers. Overcapacity because you think that you will be growing all the time. That fact increases the intensity of the competence. It’s more limited to add value. Your distributors have bargaining power. MILKY COWS products. International competitors To Avoid
- Trying to achieve competitive advantages: Cost Leadership: Product differentiation: of quality, additional services, image of your company, prestige, and reputation. Focuser: on a segment, the one which is growing.
- Change the range of activities of the firm: Buy your competitors, economies of scale, reduce costs. Grow multinational: a mature market in your country, outsider could be growth market. 3-2- 9-2- What happened in a fragmented industry? Any firm can enter the market. It has nearly weak or not entry barriers. Get the experience effects but No economies of scale. Minimum efficient size is small, if it wasn’t the firm cant be fragmented. The competition model is closed to monopolistic competence. The differentiation effect is really small. The loyalty of the customers is also reducing.
Cost of technical standard: tech specification which dominates the industry. Dominating design when we are talking about the product based on that standard. Being able to develop Who sets the standard, dominating design? the market, 1.normally the market has to try and choose one. There will be winers and loosers.
- Governments.
- Group of firms, they reach an agreement to create the design. Sometimes a firm creates a design that the other firms must follow. Cost structure of tech.- based industries
- Fixed costs. The most you sell, less unitary costs. In tech industry compete through prices to be more popular.
- R&D innovation. Long payback , some investment will be never recovered or recovered in the very long run. If you succeed you will recover your investment. Competitive advantage
- Trying to dominate the standard. If there are network effects or externalities it will be really relevant to control the standard. Cooperation talking about the group of firms (allies). Licences agreements to make your design popular. The Market Persuade the government- lobbing. You must appear as the leader to many publics although you aren’t: working with expectations.
- Getting complementary resources. Normally big firms don’t generate new products. They buy the ideas. Capital angels: people that invest money on risky patents on order to high returns. To be bought. Like youtube. You sell your idea. Protect our competitive adv. a) Patents. Problems: Temporally protected, it’s public. b) Industrial secrets. Like Coca Cola
- Time. The leader has a temporary monopoly. Along that time you must try to get a competitive advantage. They way to protect it is important.
How to get technology? Ways to get it
- From the inside: you can get an experience effect, technologically independent, specific knowledge, uncertainty, the money you expend on making your tech popular can be used by the followers.
- From the outside: license agreement, merging with another firm, reverse engineering, buying other company, cooperation agreements, buying a patent, open sources
Advantages: The innovation attitude of the firm, the control we have over the technology How do we exploit a technology? Main functions to do it internally or by cooperation:
- If we have the needed resources
- The imitation possibilities(by cooperation it is easy) Corporate strategies. When you dominate a technology, you firm can try to develop new products based on that technology. 17-2-
Lesson 11. Directions of strategic growth (I)
Corporate Strategy: Main activities that the firm is going to carry out. Range: the different activities the firm is devoted to. Which technology, function and customers (Albert model) in order to define the range of activities. Definition of product (technological solution in order to fulfil a particular need to whatever customer), market ( ) Generation of Strategic Business Units, put together different business which strategical Range definition strategy of the firm: There are different ways in order to define it.
- (^) Range itself: the width of the functions, customers & technologies used. Wide: A firm can only cover 1 function but all around the world
- Differentiation among segments: If you are treating all the activities in the same way or you can try to be distinguished in everything you are aiming at.
- Combining both of them:3 kinds of strategies: a. Focus: you are aiming at a narrow range of activities. b. Undifferentiated: Devoted to many different activities treating all the same the same way. Like Carrefour. c. Differentiated strategies: a wide range of activities managed in different ways. More differentiation: More complex.
How do we choose between these 3 strategies? Depend on the environment, range of activities of my competitors, customer behaviour (depends if he looks a wide range of products or just that he needs), the need of
Trying to stay the same, same activities, same figures, same business… Restructuring Strategy: Leaving same particular businesses sometimes entering new ones. Market penetration: Selling more of the same to the same. Getting a competitive advantage. Using the 4 p’s of marketing. Increasing the frequency of purchase and use. Increasing the amount of quantity. Product development: launching a new product to a traditional market. Through innovation. When it covered needs that were not satisfied. The product its Market development: Introducing a product in a new market. Geographically, widening the range of activities (ex Philadelphia cheese), attending to segments of the market that were unattended or inadequately attended. When you have strong competition in your market. 2-3- 2 kinds of diversification:
- Related diversification: entering in a market or activity related with the previous activity of the firm. (new market & new product). a)Technological relationship b) Distribution channels c) The resources we use. d) The market could be related. Ex. Venus de Gillete, new market & new product but really related.
2 Types of related diversification a. Limited diversification b. Chain diversification. Grown around our previous activity.
The reasons of related diversification A. Synergy. Can come from economies of scope, bunch, B. Capabilities: Production abilities, marketing, technology, management, Human Resources… Reputation, Problems / Risks A. Synergy is not automatic, a work has to be made in order to get synergies.
B. Trying to create a synergy has costs(coordinating). We need to coordinate the development of economies of scope (more complexity) C. A problem that comes from coordination: inflexibility D. Exit barriers: if all your business E. Cost of compromise: You are committed with the rest of the group. You can’t do everything you want. F. You need new abilities for new activities but this implies more costs.
- Unrelated diversification or conglomerated diversification:
The new activities are not related to the previous one. Why is something like that created?
- Reducing the global risk
- Invest on opportunities –Searching for profit investments
Can there be synergies? Immediate financial ones. You can use the money from one activity for another one (to develop that product)
Which other kind of synergy? Management one: There are some generic management abilities that could be shared. There are not synergies, just financial ones; you are not stable.
Entry barriers
- It’s made through mergers and acquisitions.
- Increasing the complexity; Generating new coordination costs.
- We can focus on the wrong activity. It’s hard to focus at everything at every moment.
- Sometimes we underestimate the price.
Concept of strategic business unit (SBU): a group of functions covered to a group of functions by a unique tech. Can be composed: lines or even different firms. Should be internal homogeneous and external heterogeneous. In you put all the business units together you will achieve synergy. Similar competitive strategy: group of activities How to create the frontiers between one SBU and other SBU?
- Planning criteria or formulation criteria: all the business that can have the same strategy, must be put together in the same strategy group, behave in the same way.
- Implementation criteria: Putting all together all the business that the way of implementing the strategy is the same even if the strategy is different. They should be compatible. The division of strategic business units normally fits. The things that must be taken into account in order to divide:
- Flexibility:
- We can divide it successively, the division can have sub-divisions
16-3- Corporate strategy and value creating. Value creation: Two firms are competitors in a business but collaborate in other business. The role of headquarters. Functions:
- They can plan and assign resources. Can be part of the election of the strategy, they can help to develop it.
- Auditing and controlling the resources. In order to promote changes in the management, strategy…
- Provide centralize services. To generate synergy. Create matrix advantage: how the headquarters help the firm in order to get more value. Depend on how the headquarters are managed, the resources of the firm… All the SBU of a firm need to have synergies, the HQ has to put limits to work, Particular actions
- Influence individually their business units. Take part the of the strategy, take part of the control, control costs, reject investment projects,
- Influence the link between SBU’s. To generate synergies. Through information systems, through the organizational design, generate specific policies, internal
transfer prices between different SBU´s of the same firm, generate some incentive systems.
- Providing supplying centralize services. Economies of scale, better services and lower price, Ex. Insurance policies
- Influence on corporate development. Composition of the business portfolio. 3 steps to have in mind in order to consider a new business in our business portfolio: a. Attractiveness test: the new business must be part of a currently or potentially attractive industry b. Entry costs: The cost should be lower because the relationship with the other SBU we have in the company. c. Improvement test: can improve its potential of generating competitive advantage whenever it enters in our corporation. If a firm passes the three test will enter the market. 17-3- 13-4- Internal and external growth are complementary. Kinds of mergers: A pure merger is when a company A and a company B disappear and create a new company C. Absorption: A company A absorb a company B and they remain being company A. Partial absorption: A company A absorb a part of company B and the other part remains being B. Ex. Mark and Spencer and el Corte Ingles. Difference between a merger and an acquisition. How can we buy a company? Traditional way When a public purchase offer is presented. The White Knight Leverage buy-out: When you buy a company using credit or bond giving the purchase company as a warranty. If the company has antisynergy you can sell a part to finance the other part. When you are issuing External growth management: Very frequently don´t generate additional value. Four possible mistakes:
- Joint Ventures: is created by two or more companies to develop some specific activities to cooperate. It has their own goals, their own employees, their own assets, personality. National and international joint ventures: Equilibrated or majoritary Minority participations: they can be just the final detail of an agreement, for example to have a percentage of the firms of the partner company.
- Interorganizational network: Reaching to an agreement: Deciding cooperating The design of the agreements: Should say, the main goals of the agreement, the things every partner is going to put, the distribution of internal benefits, legal aspects( information dealing aspects,) organizational specification, conflict resolution and punishment, planning issues. Cooperation agreement management: Two main things to be considered:
- The attitude of the partners, if the trust or not in the other partner, if they are flexible and the specific.
- The methods. 4-5- Lesson 16 The internationalization of the firm. Main features: Posibility of locating them in different countries. Share the resources A global company can share its risks. The level of multinational firms depend on the number of customers, number of countries,... Different kinds of industries on a globality measure: When the activities are inbound logistics or production, we can call the industry Global. Ex. Aircraft industry When the most activities are focus on sales, post-sales, we can call it multicountry. Ex. Retailing, food retailing, lawyer dispatches,
