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Business strategies - Growth strategies . By K Hari Krishnan. BE.,MBA., VIT Business School Email : hari_anith@yahoo.co.in. 27.12.2006. Session 1. Five Competitive Forces. Threat of New Entrants. Bargaining Power of Suppliers. Rivalry Among Existing Competitors. Threat of

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business strategies growth strategies

Business strategies- Growth strategies

By

K Hari Krishnan. BE.,MBA.,

VIT Business School

Email : hari_anith@yahoo.co.in

27.12.2006

Session 1

slide2

Five Competitive Forces

Threat of New

Entrants

Bargaining Power

of Suppliers

Rivalry Among

Existing

Competitors

Threat of

Substitutes

Bargaining Power

of Customers

slide3

Porter’s Five Forces

Model of Competition

Rivalry Among Competing Firms in Industry

Threat of New Entrants

Threat of New Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of Substitute Products

the purpose of five forces analysis
The purpose of Five-Forces Analysis
  • The five forces are environmental forces that impact on a company’s ability to compete in a given market.
  • The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.
slide5

Porter’s Five Forces

Model of Competition

Threat of New Entrants

Threat of New Entrants

slide6

Economies of Scale

Product Differentiation

Barriers to Entry

Capital Requirements

Switching Costs

Access to Distribution Channels

Cost Disadvantages Independent of Scale

Government Policy

Threat of New Entrants

Expected Retaliation

slide7

Porter’s Five Forces

Model of Competition

Bargaining Power of Suppliers

Threat of New Entrants

Threat of New Entrants

slide8

Supplier industry is dominated by a few firms

Suppliers exert power in the industry by:

Suppliers’ products have few substitutes

* Threatening to raise

prices or to reduce quality

Buyer is not an important customer to supplier

Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases

Suppliers’ product is an important input to buyers’ product

Suppliers’ products are differentiated

Suppliers’ products have high switching costs

Supplier poses credible threat of forward integration

Bargaining Power of Suppliers

Suppliers are likely to be powerful if:

slide9

Porter’s Five Forces

Model of Competition

Bargaining Power of Buyers

Threat of New Entrants

Threat of New Entrants

Bargaining Power of Suppliers

slide10

Buyers are concentrated or purchases are large relative to seller’s sales

Buyers compete with the supplying industry by:

Purchase accounts for a significant fraction of supplier’s sales

Products are undifferentiated

* Bargaining down prices

* Forcing higher quality

Buyers face few switching costs

* Playing firms off of

Buyers’ industry earns low profits

each other

Buyer presents a credible threat of backward integration

Product unimportant to quality

Buyer has full information

Bargaining Power of Buyers

Buyer groups are likely to be powerful if:

slide11

Porter’s Five Forces

Model of Competition

Threat of Substitute Products

Threat of New Entrants

Threat of New Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

slide12

Products with similar functionlimit the prices firms can charge

Products with improving price/performance tradeoffs relative to present industry products

Example:

Electronic security systems in place of security guards

Fax machines in place of overnight mail delivery

Threat of Substitute Products

Keys to evaluate substitute products:

slide13

Porter’s Five Forces

Model of Competition

Rivalry Among Competing Firms in Industry

Threat of New Entrants

Threat of New Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of Substitute Products

slide14

Intense rivalry often plays out in the following ways:

Jockeying for strategic position

Using price competition

Staging advertising battles

Increasing consumer warranties or service

Making new product introductions

Occurs when a firm is pressured or sees an opportunity

Price competition often leaves the entire industry worse off

Advertising battles may increase total industry demand, but may be costly to smaller competitors

Rivalry Among Existing Competitors

slide15

Numerous or equally balanced competitors

Slow growth industry

High fixed costs

High storage costs

Lack of differentiation or switching costs

Capacity added in large increments

Diverse competitors

High strategic stakes

High exit barriers

Rivalry Among Existing Competitors

Cutthroatcompetition is more likely to occur when:

the five forces are unique to your industry
The Five Forces are Unique to Your Industry
  • Five-Forces Analysis is a framework for analyzing a particular industry.
    • Yet, the five forces affect all the other businesses in that industry.
growth
Growth
  • Internal
  • External
    • Licensing
    • Franchising
    • Strategic Alliance
    • Joint venture
    • Merger & Acquisitions
    • Green field ventures
concentration growth
Concentration growth
  • If a company’s current product lines have real growth potential.
  • Growing firms in a growing industry tend to choose these strategies
  • Vertical
    • Forward integration
      • Assuming a function previously provided by distributors
    • Backward integration
      • Assuming a function previously provided by a supplier
  • Horizontal
    • Extending product variants and scope of operations into other territories
concentric growth
Concentric growth
  • Related diversification
    • Entering into related businesses opportunities for
      • Transferring competitively valuable expertise, technological know-how and other capabilities from one business to another.
      • Combining related activities to reduced cost
      • Achieving economies of scope
      • Exploiting well known common brand name / contact
      • Achieving synergy 1+ 2 > 3
      • Examples – Rolls royce – Aircraft , Automobiles eng
      • GE – electrical appliances , captive power gensets, energy generation / diesel locomotives
conglomerate growth
Conglomerate growth
  • Un-related diversification
    • Diversifying into an industry unrelated to its current one.
    • Future growth given importance
    • To spread the business risk
    • Ex – TATA : steel / Automobile / IT / Tea / FMCG / Life Style / Publishing / Power & energy
    • ITC – Cigarettes / FMCG/ Packaging
    • King fisher – Hard Drinks / Airlines
    • Wipro – FMCG/ IT / Electricals
    • Godreg – Machine tools / FMCG
turn around
Turn Around
  • Turn around management refers to the management measures that reverse the negative trends in the performance indicators of the company (ie) turn a sick company back to a healthy one.
indicators for the need of turn around
Indicators for the need of Turn around
  • Persistence negative cash flow
  • Declining Market Share
  • Deterioration in physical facilities
elements that contribute to a turn around
Elements that contribute to a Turn around
  • Changes in Top management
  • To initiate credibility action
  • Neutralizing external pressure
  • Initial control / cost control
  • Revenue generation thru liquidation of Non-performing assets
  • Better co-ordination
slide24

Thank U !!

best wishes

to become

Business leaders