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Strategic Management for the Foundation Business Simulation ®:

Strategic Management for the Foundation Business Simulation ®:. Analysis and Assessment. Comparison of SIC and NAICS SIC code sequence for chewing gum, bubble gum manufacturers. NAICS code sequence for chewing gum, bubble gum manufacturers. Porter’s Model of Industry Competition.

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Strategic Management for the Foundation Business Simulation ®:

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  1. Strategic Management for the Foundation Business Simulation®: Analysis and Assessment

  2. Comparison of SIC and NAICS SIC code sequence for chewing gum, bubble gum manufacturers NAICS code sequence for chewing gum, bubble gum manufacturers

  3. Porter’s Model of Industry Competition Potential Entrants Economies of scale Cost advantage Brand identity Access to distribution Government policy • Potential Entrants • Economies of scale • Cost advantage • Brand identity • Access to distribution • Government policy Threat of new entrants Bargaining power of suppliers Suppliers Supplier concentration Number of buyers Switching costs Availability of substitute raw materials Threat of forward integration • Suppliers • Supplier concentration • Number of buyers • Switching costs • Availability of substitute raw materials • Threat of forward integration • Degree of Rivalry • Number of competitors • Industry growth • Asset intensity • Product differentiation • Exit barriers Bargaining power of buyers • Buyers • Buyer concentration • Number of suppliers • Switching costs • Substitute products • Threat of backward integration Threat of substitute products/services. • Substitutes • Functional similarity • Price performance trend • Brand recognition

  4. Industry Analysis of the North American Railroad Industry • Potential Entrants • High barriers to entry • Economies of scale • No brand identity • Low switching costs • Deregulated Threat of new entrants – minimal Bargaining power of suppliers – moderate Bargaining power of buyers – significant • Buyers • Low switching costs • Many types of buyers • Buyers are dispersed geographically • Degree of Rivalry- • Significant • 7 competitors • Modest industry growth • Little product differentiation • High exit barriers • Rigid assets • Suppliers • Suppliers are concentrated • Unionized • Few buyers Threat of substitute products/services – significant • Substitutes • Close substitutes • Firms compete primarily on price

  5. Stages of Industry Evolution Introduction Stage Growth Stage Maturity Stage Decline Stage

  6. Industry Evolution and Firm Strategy

  7. Industry Growth and Firm Profitability Industry Growth Rate Firm Profitability New product development

  8. An Industry Analysis as Firms Move Through the Industry Life Cycle

  9. An Industry Analysis as Firms Move Through the Industry Life Cycle

  10. An Industry Analysis as Firms Move Through the Industry Life Cycle

  11. An Industry Analysis as Firms Move Through the Industry Life Cycle

  12. An Industry Analysis as Firms Move Through the Industry Life Cycle

  13. Using Internal Analysis to Build Competitive Advantage

  14. From Resources to Capabilities to Core Capabilities • Core Capabilities • Integration of resources and capabilities that serve as a competitive advantage over rivals • Intel’s chip manufacturing technology • Exploitation of Coke’s brand name • Resources • Stock of assets that are controlled by the firm: • Equipment • Plant • Trucks • Managers • Culture • Capabilities • The productive services by which firms deploy resources over time. • Transformation of technology into new products • Processes which generate economies of scale and/or scope

  15. Criteria for Sustainable Advantage

  16. Value Chain Elements

  17. Value Chain Elements

  18. Value Chain Primary Activities and Capstone Simulation

  19. Value Chain Secondary Activities and Capstone Simulation

  20. Business Level Strategy

  21. Business Level Strategy Definition: Actions necessary to gain and maintain competitive advantage over time within a given product market. Gaining Advantage: Meeting key success factors superior to competition Maintaining Advantage: Responding to changing consumer needs more successfully than competition

  22. Key Success Factors Definition: That set of criteria, defined by the customer base, which dictate buying decisions. Key success factors change over time Air Freight Industry

  23. Porter’s Generic Business Strategies Competitive Advantage Cost Uniqueness Cost Leadership Differentiation Broad Target CompetitiveScope Focused Low Cost Focused Differentiation Narrow Target

  24. Cost Leadership Actions necessary to gain and maintain position: 1. Economies of scale through the utilization of excess capacity. 2. Automation and utilization of robotics in manufacturing processes. 3. Development of efficient distribution networks. 4. Implementation of TQM (Total Quality Management) initiatives. Example: Dell

  25. Differentiation Actions necessary to gain and maintain position: 1. Developing innovative products/services to broad range of customers. 2. Significant investments in R&D. 3. Capability to generate a series of successful new products over time. 4. Development of flexible manufacturing systems. Example: Toyota

  26. Focused Low Cost Actions necessary to gain and maintain position: 1. Specific, very well defined target market, that is oriented toward products/services where price is an important key success factor. 2. A market that larger scale firms may ignore because these firms may generate greater efficiencies in other markets. 3. Customer may be willing to absorb certain costs (e.g. transportation) in return for lower prices. Example: Ikea Furniture

  27. Focused Differentiation • Actions necessary to gain and maintain position: • 1. Customers are willing to pay more for real or perceived superior quality. • 2. Brand name is important to customers. • 3. Profit margins are such that firms do not need to generate significant economies of scale. • Promotion directed toward identification of real or perceived superior quality features. • 5. Customers are brand loyal. • Example: Rolls Royce

  28. Decision Making Utilizing SWOT Analysis Firm A Firm B : Utilize strengths of one firm (A) to capitalize upon weakness of competitor (Firm B). (Example: Dell’s direct selling model) : Transform opportunities to strengths. (Example: Pharmaceutical firms R&D capability develops new drugs: Pfizer-Lipitor)

  29. Competitive Dynamics Competitive advantage may result from responding successfully to competitor’s mistakes + Firm 1 Firm 2 Firm 2 Firm 1 Firm 2 ROI Firm 1 - : Firm 2 initially responds to firm 1’s successful launch : Firm 1’s second venture is not profitable : Firm 2 learns from firm’s 1’s error and launches its own successful product : Firm 1’s responses to firm 2’s new actions

  30. Southwest SWOT Analysis

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