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KTIMA SPYROPOYLOY

ATHENS UNIVERSITY OF ECONOMICS & BUSINESS. Spyropoulou domain PART II II. ALTERNATIVE STRATEGIES. KTIMA SPYROPOYLOY. Teacher : Prof. S. Lioukas. Generating strategies - tools Preliminary evaluation of new strategies Qualitative evaluation ( SFA)

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KTIMA SPYROPOYLOY

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  1. ATHENS UNIVERSITY OF ECONOMICS & BUSINESS Spyropoulou domain PART II II. ALTERNATIVE STRATEGIES KTIMA SPYROPOYLOY Teacher: Prof. S. Lioukas

  2. Generating strategies - tools Preliminary evaluation of new strategies Qualitative evaluation (SFA) Synthesizing alternatives – new composite strategies Financial evaluation of new strategies Conclusions- Recommendation Part II: Alternative strategies 2

  3. Στρατηγικές επιλογές ALTERNATIVE STRATEGIES ON WHAT BASIS? WHICH DIRECTION? WHAT WAY? • Directions • Rationalize /stabilize : YES • Penetrate:YES • New products: YES • New markets: YES • Differentiation: explore • Methods • Organic development mostly • Acquisitions: exploit opportunities • Alliances: for unrelated • Generic strategy • Low cost at reasonable prices ( keep HYBRID strategy) • Expand (beyond domentic focus) Porter Ansoff 3

  4. Seek growth with acceptable profitability Products Existing New A B + + Limited potential Existing Markets C D + + +++ New 4

  5. Ansoff matrix Products Existing New • A • Rationalize: • cut costs – scrap old equipment - retire some people (A1) • eliminate unbottled packaged sales (A2) • Penetrate: • enhance brands / marketing (A3) • alternative distribution channels (cellars A4, restaurants, A5) • B • New brands • rose wine brands (B1) • represent other local wines in Peloponnese (B2) • Ouzo (B3) • Brandy (B4) Existing Markets • C • Enter new territories • Domestic (C1) • Germany-biological (C2) • China (C3) • D (new fields) • Agro tourism (nice building D1) • Snacks for wine (without freeze - on our own -D2 ) • Snacks in freeze (joint venture with Grigoris -D3) • Bulk wholesaling of local wines (D4) • . New 5

  6. Preliminary evaluation • Keep the same generic strategy (Hybrid) across • Eliminate A2: unbottled packaged sales as it damages the quality / brand name • Reject D3: Grigoris low cost strategy does not fit; partnering with other quality food chains does not appropriate enough profits • Reject D4: diverts attention from quality brands, impairs image • Strategies in existing products markets do not secure an acceptable future, rationalization – penetration has limited potential • We need alternatives from the other categories • But the company is over borrowed and cannot raise additional loans to finance growth – capital increase in the stock exchange is not feasible 6

  7. SFA evaluation (1)

  8. SFA evaluation (2)

  9. Composite strategies • Strategy 1 (Α, and certain B&C): Moderate, low risk • Cut costs, scrap old equipment, reduce staff • Penetrate / marketing • Distribution through cellars and restaurants • Rose brands • Expand into other local territories • Ouzo • Strategy 2( all of Strategy 1 plus B,C,D): • Represent other local wines • Introduce Brandy • Enter Germany • Snacks in house • Reject agro tourism and China (Low SFA evaluations)

  10. An evaluation of Strategies 1 & 2 with more SFA criteria Strategy 1 & 2 334444445523 34554 554333334455 54544 Suitability • Does it exploit opportunities arising in the environment • Does it exploit attractive market segments? • Does it contribute to the competitive position of the company ? • Does it utilize unique resources and capabilities which exist, or can be developed? • Does it fit with the culture and the prevailing philosophy of the company? • Does it provide possibilities for creating significant and viable competitive advantage? Feasibility. • Do we have the resources and capabilities to implement the strategy? • Can the resources and skills for its implementation be developed in the course of action? • Can the alternatives which compose this strategy be integrated in the current operations? • Are there synergies among alternatives and with the existing activities? • Does it contribute to the achievement of attractive growth rates? • Does it contribute to the profitability of the company? Acceptability. • Is the strategy attractive for the share holders? • Has it secured the commitment of the employees? • Is it supported by managers ? • Can it be supported by other stakeholders? Can it be resisted? • Υis there a good probability of success? • Can it stand under adverse conditions (pessimistic scenario)? TOTAL GRADE....................................................................................... 6669 10

  11. Financial evaluation • Are cash flows positive? • Is NPV acceptable ? • We evaluate each composite strategy in total • As there are synergies, it is difficult to isolate each alternative, • With the exception of snacks / delicatessen which accompany the wine, which is evaluated as separate concern

  12. Free cash flows of strategies 1 & 2 % of revenue Strategy 2 20% Strategy 1 Satisfactory rate 15% Existing strategy 10% 5% 0% έτη 1 2 3 4 5 6 7 12

  13. Snacks /Delicatessen: cause cash flow problems

  14. Conclusions • Existing strategy is not acceptable. It gives 2-3 years with negative cash flows, and future prospects are limited • Strategy 1: (cost cutting, marketing, alternative distribution networks, expansion into Greece and introduction of Ouzo): • there a possibility to reach satisfactory performance after 5 or 6 years, with no cash flow problems between. It is acceptable • The more aggressive strategy 2, (adding merchandizing of more Peloponnese wines, Brandy, entering Germany with biological wines and snacks development in house) • would produce better results than Strategy 1, after 5-6 years • but we have to face negative cash flows for the first 2-3 years. Can we finance this period? Negotiate with banks. • If not then drop snacks/delicatessen 14

  15. ΟΙΚΟΝΟΜΙΚΟΠΑΝΕΠΙΣΤΗΜΙΟΑΘΗΝΩΝ Part III: Implementing the new strategy Spyropoulou Domain

  16. Part III: Implementation of Strategy 2 Areas of intervention (7S) Plan of changes Organizing for implementation Time scedule Plan of changes Project management Priorities Leadership Skills people Improvisation Success factors Structure Systems Values culture 16

  17. What changes? UsingMcKinsey 7-S Structure Systems Shared values Strategy Skills Style Staff

  18. What changes? Using the 7Ss (1)

  19. What changes? Using the 7Ss (2)

  20. Plan if changes • From 7S to specific actionable projects : • Sell old equipment • Formulate and apply an early retirement plan • Recruit a Marketing Director • Form a horizontal team for the introduction of Ouzo • Buy distillers for ouzo • Recruit specialist in distilling • New department for snacks / delicatessen • Strike agreements with cellars and restaurants • Recruit an expert in wine tasting • Train other people in wine tasting • Train salesmen for restaurants, cellars • Make agreements with local distributors in other areas • Introduce rose wine brands with historical local names… 20

  21. Plan if changes • Cost of changes: • About 250 000 Euro for two years • Return of “investment” in change • IRR with the changes – IRR without = IRR 8% • Financing: seek new loan • Execution: • Fast, in two years 21

  22. Priorities • Cut costs to release resources to the plan • Staff the new Department of Marketing • Train salesmen • Investment in new equipment • Engage all managers &staff in the change... 22

  23. Method of implementation • Select a project manager to coordinate all changes • From existing managers • Active engagement of top management: give the tone from the top • Select certain new managers • Marketing, ++ • Monitoring execution • Form horizontal project teams • for ouzo, agreements, delicatessen 23

  24. Project organization and monitoring Steering committee DIRECTIONS REPORTING PROJECT MANAGER: WHO? Team for new products (Ouzo,…) Marketing - sales teams / training Team for making local agreements Τhis project organization is temporary. Will be dissolved after implementation, when all the changes envisaged are integrated into operations.. 24

  25. Milestones Time schedule for the two years Priority projects Raise a new loan Recruit / staff marketing Agreement with local distributors Buy /install equipment... Promotion of Ouzo Approach restaurants Promotion of delicatessen 1, 2... Train salesmen. .. 7-12 months 2nd year 1-6 months

  26. Difficulty and time needed for changes (indicative) High Culture Systems Difficulty Strategy Skills Capabilities Structure Low Time

  27. THEEND «Ούτος (οίνος) θεοίσι σπένδεται θεός γεγώς» (Ευριπίδη, Βάκχαι, στ. 280-285) [Μτφρ.: Θεός είναι (το κρασί) και χρησιμεύει για σπονδή (θυσία) στους θεούς]. 27

  28. THEEND «Ούτος (οίνος) θεοίσι σπένδεται θεός γεγώς» (Ευριπίδη, Βάκχαι, στ. 280-285) [Μτφρ.: Θεός είναι (το κρασί) και χρησιμεύει για σπονδή (θυσία) στους θεούς]. 28

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