Introduction Objectives and content of the program

1. Roll-out Qtr 1 Qtr 2 Qtr 3 Qtr 4 Action 1 Action 2 Action 3 Action 4 Action 5 Introduction Objectives and content of the program Introduction Module I Module II Module III Module IV Module V Module VI Conclusion

2. Contents • Administrative issues • Strategy and its importance for A.T. Kearney • Defining strategy and how business unit strategy compares to other types of strategy • Objectives of A.T. Kearney’s Business Unit Strategy Training Program • Content of A.T. Kearney’s Business Unit Strategy Training Program

3. Administrative issues Welcome to the Business Unit Strategy Training Program Help make ATK strategy capable Develop skills in strategic analysis Goals of the Business Unit Strategy Training Program Share and test experiences with others Network with like-minded colleagues Think about business issues from a strategic perspective Source: A.T. Kearney

4. Administrative issues About the creation of this program • The program was conceived and developed by the Global Strategy Initiative (GSI), an initiative begun in 1997 to raise A.T. Kearney’s strategy capability. The program is one of several deliverables resulting from the GSI • The program materials were developed by a team of A.T. Kearney consultants from around the world over the course of 9 months • The program was created using a “bottom-up” approach, in which sources from around the firm and academia were gathered and with time filtered into the “finished product” • This is the first version of the business unit training program. It will be updated and improved on a regular basis by a new team of A.T. Kearney consultants Source: A.T. Kearney

5. Administrative issues Personal introductions • Name • Office • Experience with A.T. Kearney • Experience before A.T. Kearney • Specific strategy highlights Source: A.T. Kearney

6. Administrative issues What is your perspective on strategy, and what are your expectations of the course? • What is your view on business unit strategy in general? • What is your view on A.T. Kearney and business unit strategy? • What are your expectations with regard to this training program? Source: A.T. Kearney

7. Administrative issues Schedule for the A.T. Kearney Business Unit Strategy Training Program Time Monday Tuesday Wednesday Thursday Friday 8-9 Introduction Module II Module III Module V 9-10 Final presentation 10-11 Module I 11-12 12-1 Conclusion 1-2 Lunch Lunch Lunch Lunch Lunch 2-3 Module VI Guest Speaker 3-4 Module IV Guest Speaker 4-5 Case preparation Case preparation Case preparation Strategy literature review 5-6 6-7 Case preparation Case presentation Case presentation Case presentation 7-8 Dinner 8-9 Dinner Dinner Dinner Dinner 9-10 10-? Source: A.T. Kearney

8. Administrative issues What are our expectations of you? Expectation Comments Attentive Give your attention and participate Punctual Be punctual to ensure efficient time management - we have a lot of material to cover Curious Ask questions - there are no bad ones Team-oriented Work within teams to reinforce concepts and enhance learning - and give it your full effort Resourceful Draw upon what you have learned in the course and knowledge you have gained through project experiences and other schooling to augment analyses, presentations and group learning Helpful Provide feedback so we can make the course even better Source: A.T. Kearney

9. Contents • Administrative issues • Strategy and its importance for A.T. Kearney • Defining strategy and how business unit strategy compares to other types of strategy • Objectives of A.T. Kearney’s Business Unit Strategy Training Program • Content of A.T. Kearney’s Business Unit Strategy Training Program

10. Strategy and its importance for A.T. Kearney The consulting industry has undergone continuous change during the past two decades 1980-1989 1990-1997 1998 External trends Consultants’ value proposition Key players Key factors for success • Globalization of markets • Building strategy capabilities • Cost reduction • Organizational design • McKinsey • BCG • Bain • Booz•Allen & Hamilton • Problem solving capabilities • Deregulation • Convergence of industries • Dismantling of conglomerates • Downsizing • Industry knowledge/insights • Process facilitators on operations/IT • McKinsey • A.T. Kearney • BCG • Bain • Booz•Allen & Hamilton • Big six • International office network • Industry practices • Digital world • Virtual companies • Outsourcing • Regionalization (EU, NAFTA, APEC) • Concentration of industries • End-to-end capabilities • McKinsey • A.T. Kearney • Big six (Big four) • CEO control • Integrated solutions Note: BCG, Bain, and Booz•Allen & Hamilton are not considered as key players of the future, based on with their present strategy focused offering. Shifts in focus or mergers and acquisitions can make these players more viable competitors in the future Source: A.T. Kearney

11. Strategy and its importance for A.T. Kearney 5 Strong capabilities A.T. Kearney must improve its strategy capability to become end-to-end capable 1 Weak capabilities A.T. Kearney’s current value proposition A.T. Kearney’s end-to-end capabilities Information technology Strategy Operations 2 5 5 Need for improvement on a global basis Source: A.T. Kearney

12. Strategy and its importance for A.T. Kearney Introduction to A.T. Kearney’s Strategy Practice Strategy practice mission statement We seek to build the premier capability in developing valueandgrowthstrategies for major corporations worldwide and in driving implementation to measurable results We shall broaden our service offerings to include greater perception, ideas, frameworks and methodologies for solving corporate and business unit issues We shall broaden our focus to strengthen current account relationships, while building relationships with the leaders of the future We shall achieve the image as a great strategic consulting company based on delivering superior contributions We shall focus on further developing the growth potential across industries, particularly as it relates to information and technology Source: A.T. Kearney

13. “A.T. Kearney’s Strategy Practice helps clients turn strategy into action. It sees strategy as the design of the entire business system and an integrated set of actions to continuously create and redefine competitive advantage. This is done through superior customer value with the aim of maximizing shareholder value in the long term” Strategy and its importance for A.T. Kearney A.T. Kearney’s value proposition in strategy Source: A.T. Kearney

14. Contents • Administrative issues • Strategy and its importance for A.T. Kearney • Defining strategy and how business unit strategy compares to other types of strategy • Objectives of A.T. Kearney’s Business Unit Strategy Training Program • Content of A.T. Kearney’s Business Unit Strategy Training Program

15. Defining strategy and how business unit strategy compares to other types of strategy Some strategy definitions Author(s) Definition Sun Tzu Alfred D. Chandler, Jr. Kenichi Ohmae James Brian Quinn Michael Porter Gerry Johnson & Kevan Scholes • Strategy is the great work of the organization. In situations of life or death, it is the Tao of survival or extinction. Its study cannot be neglected • The determination of the long run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals • Strategy is the way in which a corporation endeavors to differentiate itself positively from its competitors, using its relative corporate strengths to better satisfy customer needs • Strategy is the pattern or plan that integrates an organization's major goals, policies, and action sequence into a cohesive whole. A well-formulated strategy helps to marshall and allocate an organization’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment, and contingent moves by intelligent opponents • Strategy is the matching of a company’s strengths and weaknesses to the opportunities and threats in the environment • Strategy is the direction and scope of an organization over the long term: ideally, which matches its resources to its changing environment, and in particular its markets, customers or clients so as to meet stakeholder expectations Source: Want, R.L. (1988); A New Translation of Sun Tzu’s Classic “The Art of War”;Chandler, A.D. (1960); Strategy and Structure; Ohmae, K. (1976); Mind of the Strategist; Quinn, J.B. (1988); Strategies for Change; Porter, M.E. (1980); Competitive Strategy; Johnson, G. & Scholes, K. (1993); Exploring Corporate Strategy

16. Defining strategy and how business unit strategy compares to other types of strategy A.T. Kearney’s business unit strategy definition enables consultants to carry out an “acid test” as to whether the client has a clear strategy that can enable the company to achieve success A Business Unit Strategy is about ... an integrated set of actions . . . with the aim of maximizing shareholder value in the long-term to continuously create and rede-fine competitive advantage . . . throughsuperiorcustomer value . . . to design the entire value system . . . • Does the clientmanage thevalue chain in an integrated way? • Does its plan include all of the needed actions? • Is the delivery mechanism inplace to meetstrategicobjectives? • Is the value system effectively structured? • Is the client's business competition oriented? • Is the competitive advantage sustainable? • Is the client's business customer oriented? • Does the customer perceive sufficient value? • Does thecompany have a key strategicobjective? • Is the company maximizing shareholder value? Source: A.T. Kearney

17. Defining strategy and how business unit strategy compares to other types of strategy The A.T. Kearney definition of BU strategy reflects the importance that the firm places on strategy for the future success of the company an integrated set of actions . . . to design the entire value system . . . to continuously create and redefine competitive advantage . . . through superior customer value . . . with the aim of maximizing shareholder value in the long-term • A program of specified organizational, manufacturing, financial, and managerial actions aimed at integrating all resources of a BU towards a common goal • The sequence of steps and their respective elements (technology, production design, sales, distribution, etc.) by which companies in a given business produce their goods or services and deliver to the customer • Competitive advantage is what a company possesses when it earns or has the potential to earn a higher ratio of profit than its competitors. Competition without an advantage for any particular competitor results in a totally competitive market. The market’s forces will not allow any company to realize any returns beyond the cost of equity • Competitive advantage needs to be sustainable in a way that competitors cannot copy or nullify the particular advantage • The “value” that an end-user receives from the product, which could be economic (low price through cost reduction) or perceived benefit (qualitative) contributed by the product • By maximizing profits, companies maximize shareholder value (the economic value received by owners of equity through dividend payments and/or increases in share price). Shareholder value maximization is widely seen as the appropriate goal of a company and the primary yardstick for measuring performance Source: A.T. Kearney

18. “How to compete” “Where to compete” Defining strategy and how business unit strategy compares to other types of strategy Although strategy can encompass corporate, business unit and functional strategy, the focus of this training program is on the business unit • Strategies for industry restructuring Industry • Corporate strategy and finance • M&A&D • Design of the corporation and corporate center • Resource allocation • Corporate strategy defines the scope of the company in terms of the industries and markets in which its various business units compete Corporate • Market and competitive strategies • Business unit strategy defines how the company competes within a particular industry or market Business unit Business unit R&D Personnel Finance Production Sales and marketing • Functional strategy defines the detailed deployment of resources at the operational level Source: A.T. Kearney

19. Definition of an SBU Some traditional characteristics • A strategically and functionally distinct execution-oriented entity that is usually a subset of a corporation • A unit that has a: • – Well-defined market (or market segments) • – Well-defined group of competitors • – Well-defined business system that serves the market • A unit grouped as such to optimize the collective organizational capabilities among its constituent entities • It is a single business, often with its own P&L responsibilities, or collection of related businesses that can be planned separately from the rest of the corporation/other business units • It has its own competitors, which it is trying to surpass • It has a manager who is responsible for strategic planning, profit, and performance Defining strategy and how business unit strategy compares to other types of strategy What is a strategic business unit (SBU)? Source: A.T. Kearney; Kotler, P. (1997); Marketing Management

20. R&D ? ? Defining strategy and how business unit strategy compares to other types of strategy The main elements of a business unit strategy Product/market “Where to compete” In which segments should the company compete? Strategic roadmap “When to compete” Iterative process Business system “How to compete” Capabilities? Design Manuf. S&M Service Critical path Action? Competitor reaction? At what time and in which sequence should a strategy be executed? How should the business system be designed? Source: A.T. Kearney

21. Defining strategy and how business unit strategy compares to other types of strategy Strategy projects differ from other types of engagements in several ways • Unique to each engagement and therefore issue-driven and more flexibly structured • There is not one approach that will work for every situation. However, for every company in every situation, there will be an ideal approach • Broader in scope • More long-term oriented in nature and results might often be intangible for several years • Characterized by ambiguity and a high degree of uncertainty as consultants often don’t know where the project will “end up” • Characterized by many iterations throughout the project due to new findings which can result in changes to the scope and the nature of the project • Characterized by a process and not a single approach Source: A.T. Kearney

22. Defining strategy and how business unit strategy compares to other types of strategy Strategy projects differ from other consulting projects in their process approach Mechanical systems thinking Intuition Strategic thinking Problem prototype Process of thought Solution Rearrangement of elements Local optimization, or seeing the tree, not the forest Transformation or changed configuration Source: Ohmae, K. (1976); The Mind of the Strategist

23. Contents • Administrative issues • Strategy and its importance for A.T. Kearney • Defining strategy and how business unit strategy compares to other types of strategy • Objectives of A.T. Kearney’s Business Unit Strategy Training Program • Content of A.T. Kearney’s Business Unit Strategy Training Program

24. Objectives of A.T. Kearney’s Business Unit Strategy Training Program The main objectives of the program Company objectives Individual objectives • Strengthen A.T. Kearney’s overall strategy consulting delivery capabilities • Raise A.T. Kearney consultants’ strategy skills to a higher level • Teach A.T. Kearney consultants techniques likely to be applied in many future strategy engagements • Teach A.T. Kearney’s unique and execution- oriented perspective on strategy • Establish a common vocabulary and point-of-departure for all A.T. Kearney strategy engagements • Add to portfolio of consulting skills • Offer broader career possibilities within A.T. Kearney • Satisfy intellectual curiosity • Broaden one’s perspective towards consulting engagements Source: A.T. Kearney

25. Objectives of A.T. Kearney’s Business Unit Strategy Training Program Take-away objectives from the “instruction” and “case” sections of the program The “instruction” section The “case” section • Understanding of the fundamental strategy analysis techniques • Familiarization with strategy concepts that consultants are most likely to apply • Endowment of knowledge that enables consultants to “know where to go,” when asked to use the techniques • Ability to practically apply the knowledge gained from the course in strategy engagements • Reinforce the concepts taught during the class • Understand when, how, and to what extent to apply the techniques - realizing that use of the analyses will vary with each engagement • Realize that other project-specific strategy techniques are also required in a consulting engagement • Understand how to structure a logical and methodical game plan when approaching a strategy project • Be prepared to “hit the ground running” when staffed on an assignment Source: A.T. Kearney

26. Objectives of A.T. Kearney’s Business Unit Strategy Training Program The objective of the training program is to teach a set of techniques that form the building blocks of analysis in strategy engagements and not to teach an approach Issue/clientobjective Framework Solved by Defines Contains Approach Deliverable Technique Uses Shows Shows Example Tool Business issue A question which expresses the client’s concern or the uncertainties which must be resolved to achieve the client’s objective. Issue questions are not rhetorical, they should have clear alternative solutions and significant consequences associated with the answer Framework A way of looking at a client’s business issue; a set of building blocks, planks or beliefs that determine at a high level how we might approach a client issue; that ultimately translates to a collection of deliverables Approach A logical structure or sequence of deliverables that might span frameworks. There is no one “approach” to strategy Deliverable A result or insight necessary for the client to reach its objective; that which A.T. Kearney delivers to our client (or to internal clients within A.T. Kearney) as a result of our proposed solutions and engagement efforts Technique A method, model, or calculation that produces a deliverable Tool A spreadsheet, model, database, survey or software used as part of a technique to produce a deliverable Example A specific illustration or application of a deliverable, technique, or tool, generally drawn from a client engagement but sanitized so that the client is unrecognizable Source: A.T. Kearney, Centres of Excellence

27. Objectives of A.T. Kearney’s Business Unit Strategy Training Program This program focuses on teaching techniques because there is not a standard approach to strategy Techniques allow consultants to: Overall strategy frameworks and approaches are not the focus of this program as they vary greatly from client to client and project to project • Be flexible in modeling analyses after issues instead of being confined to rigid approaches that may not be relevant in all engagements • Think with a strategic perspective • Adapt skills to other types of consulting engagements Source: A.T. Kearney

28. Module Example Exercise Case Objectives of A.T. Kearney’s Business Unit Strategy Training Program The training program focuses intensively on exercises and examples to ensure that the theoretical knowledge can be practically applied I Oil and gas services company Food and beverage industry Copier company n.a. Automotive industry n.a. Big Kahuna Company/ Cessna Aircraft Company Airline industry Coca Cola n.a. Petroleum industry n.a. II III IV V VI Motorola

29. Objectives of A.T. Kearney’s Business Unit Strategy Training Program The techniques taught in this program do not cover all of the areas that might be relevant in strategy projects Illustrative Change Management (Enterprise Transformation) • The techniques which are taught in the program are the most commonly used techniques in BU strategy engagements • However, some techniques are not described, because they either are covered by other training programs or do not specifically relate to BU strategies BU strategy program Finance (CEO Agenda) Purchasing (Strategic Sourcing) Source: A.T. Kearney

30. Orientation NCO Engagement execution BUS/ SS Engagement management ET Business development CEO Account management LSPD Leadership MS Businessprocess Targetaudience Associate BA Manager Principal Officer Objectives of A.T. Kearney’s Business Unit Strategy Training Program This program is complementary to A.T. Kearney’s other major training programs BUS: Business Unit Strategy CEO: CEO Agenda ET: Revised version of “Transforming the Enterprise” LSPD: Lead Strategy and Proposal Development MS: VP- Mind setting program NCO: New Consultant Orientation (including Pyramid and Consultant Process Workshop) SS: Strategic Sourcing Source: A.T. Kearney

31. Objectives of A.T. Kearney’s Business Unit Strategy Training Program This program can be viewed as A.T. Kearney’s “chess book” The goal of the chess book is not to develop new or proprietary techniques, but to collect and explain the most commonly used ones to ensure coherent and successful chess playing If A.T. Kearney were a chess club,it would want to establish a set of commonly used, advanced and structured techniques to “play its own game” To help clarify these techniques and their use, we are putting them in a “chess book” for the use of all club members Source: A.T. Kearney

32. Contents • Administrative issues • Strategy and its importance for A.T. Kearney • Defining strategy and how business unit strategy compares to other types of strategy • Objectives of A.T. Kearney’s Business Unit Strategy Training Program • Content of A.T. Kearney’s Business Unit Strategy Training Program

33. Roll-out Qtr 1 Qtr 2 Qtr 3 Qtr 4 Action 1 Action 2 Action 3 Action 4 Action 5 Content of A.T. Kearney’s Business Unit Strategy Training Program The structure of the Business Unit Strategy Training Program Module II Structure and dynamics of the industry Module I Identification of the key issues of the engagement Module III Characteristics and dynamics of the individual companies Module V Definition and evaluation of strategic alternatives Module VI Implementable recommendations Module IV Execution capacity of the client Note: The order of presentation of the curriculum elements should not be interpreted as a sequential guideline for a strategy engagement. Different elements of the program may be referenced at different times in the engagement Source: A.T. Kearney

34. Content of A.T. Kearney’s Business Unit Strategy Training Program The content of the program is structured such that related techniques are categorized into deliverables and related deliverables into modules Module: A collection of deliverables that together address a key issue Description: Usage: Methodology: Example: Exercise*: Conclusion: A technique put into context through a definition and/or a description Why, how, and when the technique is applied The process for using the technique A “real-life” presentation of a technique as it would be presented in its completed form A short exercise that requires the participants to employ the technique A summary of key points, strengths, weakness, and references Deliverable: A collection of techniques that address specific issues or sub-issues Technique: A specific analysis performed to test hypotheses * Exercises are located separately in a workbook Source: A.T. Kearney

35. Modules I and II: Deliverables and Techniques Module Deliverable Technique I. Identification of the key issues of the engagementII. Structure and dynamics of the industry • Key issues of the engagement • Industry structure • Development of the industry • Product/market analysis • Demand and supply economics • Industry analysis frameworks • Issue analysis • Players analysis • Strategic group analysis • Substitution analysis • Supply chain analysis • Exit and entry barrier assessment • Industry strategic era analysis • Life cycle analysis • Trends analysis • Size and growth of the market • Product/market segmentation • Demand and supply economics • Structure-conduct-performance • The five forces • The strategic triangle Source: A.T. Kearney

36. Modules III and IV: Deliverables and Techniques Module Deliverable Technique III. Characteristics and dynamics of the individual companies IV. Execution capacity of the client • Overall company profile • Product/market focus • Overview of the value chain • Financial resources and performance • Company analysis frameworks • Assessment of execution capacity • Purpose of the organization • Stakeholder analysis • Strategic era analysis • Strategic planning framework • Evaluation of product/market segments • Value chain analysis • Cost and margin driver analysis • Development over time • Financial ratios • 7S • Benchmarking • SWOT • Operational capacity assessment • Organizational capacity assessment • Information technology capacityassessment Source: A.T. Kearney

37. Modules V and VI: Deliverables and Techniques Module Deliverable Technique V. Definition and evaluation of strategic alternatives VI. Implementable recommendations • Decision-making • Long-term scenarios • Generic strategy frameworks • Implementable recommendations • Decision tree • Game theory • Scenario planning • End game • Three generic strategies • Gaining strategic advantage • The growth matrix • Implementation plans Source: A.T. Kearney