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Topic 8 Competitive Strategy and Strategic Alliances. Dr. Songporn Hansanti . Competitor Analyses. Internal Assessments External Assessments: Analyzing Competitor Operations Strategic Alliances. Who are they?. Nature of business operation Direct Competitor Indirect Competitor.

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competitor analyses
Competitor Analyses
  • Internal Assessments
  • External Assessments: Analyzing Competitor Operations
  • Strategic Alliances
who are they
Who are they?
  • Nature of business operation
  • Direct Competitor
  • Indirect Competitor
competitor analyses4
Competitor Analyses
  • Uses of Competitor Analysis
    • provides insights into rivals’ strategies and enable companies to:
  • Outwit Rivals - detect marketplace changes more quickly than competitors
  • Outmaneuver Rivals - Being the first to introduce new products and technologies
  • Outperform Rivals - In terms of new product development, market share, customer satisfaction levels and corporate reputation
competitor analysis
Competitor Analysis
  • Internal Assessments
  • Corporate missions: provide overviews of corporate priorities in terms of products, markets, technology, and corporate culture
  • Strategic intents: relate to long-term competitive aspirations
  • Core competencies: are articulations of what companies do better than others – their acknowledged expertise vis-à-vis the rest of the industry: innovation styling, value
benefits of strategic alliances
Benefits of Strategic Alliances

Potential Benefits

of Strategic Alliances

Ease of

Market

Entry

Shared

Risk

Shared

Knowledge

and

Expertise

Synergy

and

Competitive

Advantage

scope of strategic alliances
Scope of Strategic Alliances
  • Significant variation
    • Comprehensive alliance
    • Narrowly defined alliance
  • Degree of collaboration depends upon basic goals of each partner
types of alliances
Types of Alliances
  • Comprehensive
  • Functional
    • Production
    • Marketing
    • Financial
    • Research and Development
implementation of strategic alliances
Implementation of Strategic Alliances
  • Selection of partners
  • Compatibility
  • Nature of potential partner’s products or services
  • Relative safeness of the alliance
  • Learning potential of the alliance
joint management considerations
Joint Management Considerations
  • Shared management agreements
  • Assigned arrangements
  • Delegated arrangements
shared management agreement
Shared Management Agreement

Partner 1

Partner 2

Both partners

participate actively

Alliance

assigned arrangement
Assigned Arrangement

Partner 1

Partner 2

One partner takes

primary responsibility

Alliance

delegated arrangement
Delegated Arrangement

Partner 1

Partner 2

Both partners delegate

management to the

joint venture’s

executives

Joint Venture

pitfalls of strategic alliances
Pitfalls of Strategic Alliances

Pitfalls

of Strategic Alliances

Incompatibility

of

partners

Access

to

Information

Distribution

of

Earnings

Loss

of

Autonomy

Changing

Circum-

stances

slide16
Beijing Jeep – A joint venture between American Motors Company (part of Daimler Chrysler) and Beijing Auto Works
merger acquisition m a
Merger & Acquisition (M&A)
  • Technological change
  • Efficiency of operations
  • Globalization and freer trade
  • Changes in industry organization
  • New industries
  • Deregulation and regulation
  • Favorable economic and financial conditions
  • Negative trends in industries and economies
  • Widening inequalities in income and wealth
merger
Merger
  • เป็นการรวมที่ไม่จำเป็นต้องตั้งบริษัทใหม่ ซึ่งการรวมกันจะเป็นตกลงกันว่าจะเลิกบริษัทใด แล้วแต่จะตกลงกัน
  • เช่น บริษัท สปามหาวินาศ และ บริษัท สปาเทวาบรรลัย ต่างประกอบกิจการ ได้รวมกิจการเข้าด้วยกัน เหลือเพียง บริษัท สปามหาวินาศ เพียงบริษัทเดียว
  • ซึ่งการรวมแบบนี้อาจจะเรียกได้ว่า Acquisition ซึ่งเป็นการซื้อกิจการของบริษัทอื่น
  • อาจซื้อเพียงทรัพย์สิน หรือทั้งทรัพย์สินและหนี้สิน (โอนกิจการ)
  • หรืออาจเป็นเข้าไปซื้อหุ้นเพื่อให้เพียงพอกับการเข้าไปได้บริหารกิจการ (Take Over)
merger19
Merger
  • เป็นการรวมที่ไม่จำเป็นต้องตั้งบริษัทใหม่ ซึ่งการรวมกันจะเป็นตกลงกันว่าจะเลิกบริษัทใด แล้วแต่จะตกลงกัน
  • เช่น บริษัท สปามหาวินาศ และ บริษัท สปาเทวาบรรลัย ต่างประกอบกิจการ ได้รวมกิจการเข้าด้วยกัน เหลือเพียง บริษัท สปามหาวินาศ เพียงบริษัทเดียว
  • ซึ่งการรวมแบบนี้อาจจะเรียกได้ว่า Acquisition ซึ่งเป็นการซื้อกิจการของบริษัทอื่น
  • อาจซื้อเพียงทรัพย์สิน หรือทั้งทรัพย์สินและหนี้สิน (โอนกิจการ)
  • หรืออาจเป็นเข้าไปซื้อหุ้นเพื่อให้เพียงพอกับการเข้าไปได้บริหารกิจการ (Take Over)
consolidation or amalgamation
Consolidation or Amalgamation
  • คือการรวมกิจการที่ตั้งบริษัทใหม่ และยกเลิกบริษัทเดิม
  • บริษัทใหม่นี้ต้องเป็นชื่อใหม่ มีการออกหุ้นใหม่ ผู้ถือหุ้นของบริษัทเดิมจะได้รับหุ้นสามัญของบริษัทใหม่แทนของบริษัทเดิม
  • เช่น บริษัท สูดดมอ๊อกซิไดซ์ และ บริษัท เป่าและดม ต่างประกอบกิจการผลิตยาดม ได้รวมกิจการเข้าด้วยกัน และจดทะเบียนใหม่ชื่อ บริษัท สูดเป่าและดม
m a terminology
M&A Terminology
  • Merger
    • Negotiated deals
    • Mutuality of negotiations
    • Mostly friendly
  • Restructuring — changes to improve operations, policies, and strategies
types of mergers
Types of Mergers
  • Horizontal mergers
    • Between firms in same business activity
    • Rationale
      • Economies of scale and scope
      • Synergies (ex. combining of best practices)
    • Government regulation due to potential anticompetitive effects
  • Vertical mergers
    • Combinations between firms at different stages
    • Goal is information and transaction efficiency
m a strategy
M&A Strategy
  • Defines the long-term plans, policies and culture of an organization
  • Strategic planning is a dynamic process that requires inputs from all segments of the organization
  • Acquisition and restructuring policies and decisions should be part of the company's overall strategic plans and processes
  • Ultimate responsibility for strategic planning resides in the top executive group
strategic planning processes in m a
Strategic Planning Processes in M&A
  • Essential elements in strategic planning
    • Assessment of changes in the environments
    • Evaluation of company capabilities and limitations
    • Assessment of expectations of stakeholders
    • Analysis of company, competitors, industry, domestic economy and international economies
    • Formulation of the missions, goals and policies for the master strategy
    • Development of sensitivity to critical environmental changes
strategic planning processes in m a26
Strategic Planning Processes in M&A
  • Essential elements in strategic planning
    • Formulation of organization performance measurements and benchmarks
    • Formulation of long-range strategy programs
    • Formulation of mid-range programs and short-run plans
    • Organization, funding and other methods to implement all of the preceding elements
    • Information flow and feedback system for continued repetition of above activities and for adjustments and changes at each stage
    • Review and evaluation of above processes
strategic planning processes in m a27
Strategic Planning Processes in M&A
  • Monitoring environments
    • Should encompass both domestic and international dimensions
    • Include analysis of economic, social, technological, political, and legal factors
  • Strategy also deals with stakeholders – groups with interests in the firm and its actions
  • Organization cultures
    • Firm cultures affect strategic thought and plans
    • Failure to combine cultures is a key obstacle to merger integration
alternative strategy methodologies
Alternative Strategy Methodologies
  • SWOT or WOTS UP – inventory and analysis of organizational strengths, weaknesses, environmental opportunities and threats
  • Top-down or Bottom-up – relate to company forecasts vs. aggregation segment forecasts
  • Computer models – allow detail and complexity
  • Logical incrementalism – well-supported moves from current bases
  • Comparative histories – learn from the experiences of others
alternative strategy methodologies29
Alternative Strategy Methodologies
  • Synergy – look for complementarities
  • Adaptive processes – periodic reassessment of environmental opportunities and organization capability adjustments required
  • Environmental scanning – continuous analysis of all relevant environments
  • Intuition – insights of brilliant managers
  • Entrepreneurship – creative leadership
alternative analytical frameworks
Alternative Analytical Frameworks
  • Product life cycle – introduction, growth, maturity, decline stages with changing opportunities, threats
  • Learning curve – costs decline with cumulative volume experience (first mover advantage)
  • Competitive analysis – industry, suppliers, customers, complemetors, etc.
  • Value chain analysis – seek to add product characteristics valued by customers
  • Cost leadership – low-cost advantages
alternative analytical frameworks31
Alternative Analytical Frameworks
  • Resource-based view – capabilities are inimitable
  • Relatedness matrix – unfamiliar markets and products involve greatest risk
  • Focus matrix – narrow versus broad product families
  • Growth/share matrix – aim for high market share in high growth markets
  • Attractiveness matrix – aim to be strong in attractive industries
  • Global matrix – aim for competitive strength in attractive countries
alternative analytical frameworks32
Alternative Analytical Frameworks
  • Product-market matrix
  • Competitive-position matrix
alternative analytical frameworks33
Alternative Analytical Frameworks
  • Growth-share matrix
  • Strength-market attractiveness matrix
strategy formulation approaches
Strategy Formulation Approaches
  • Boston Consulting Group Approach
    • Historical emphasis: experience curve, product life cycle, product portfolio balance
    • Recent approaches
      • Impact of the Internet and other innovations
      • Performance measurements - cash flow return on investment (CFROI)
  • Michael Porter Approach (1980, 1985, 1987)
    • Select attractive industry using “Five Forces”
    • Develop competitive advantage through cost leadership, product differentiation, or focus
    • Develop attractive value chains
evaluation of strategic approaches
Evaluation of Strategic Approaches
  • Steps taken in checklists and iterations:
    • State objectives
    • Define environment
    • Analyze strengths/weaknesses relative to environment
    • Assess potential in environment
    • Compare potential to objectives
    • If gap, search for alternative ways to close gap
    • Select alternatives for analysis
    • Cost/benefit analysis of alternatives
    • Tentative selection — formulate plans and actions
formulating a merger strategy
Formulating a Merger Strategy
  • Requires continuing reassessment
    • Industry analysis
    • Competitor analysis
    • Supplier analysis
    • Customer analysis
    • Substitute products
    • Complementors
    • Technology changes
    • Societal factors
    • Firm's strengths/weaknesses relative to present/future industry conditions
formulating a merger strategy38
Formulating a Merger Strategy
  • Goal/capability analysis
    • Are current goals, policies appropriate?
    • Do goals, policies match resources?
    • Does timing of goals/policies reflect ability of firm to change?
  • Work out strategic alternatives
    • May not include current strategy
    • Choose best
    • Mergers represent one set of alternatives
formulating a merger strategy39
Formulating a Merger Strategy
  • Grove (1996)
    • Firm must adjust to six forces
      • Existing competitors
      • Potential competitors
      • Complementors
      • Customers
      • Suppliers
      • Industry transformation
    • Eclectic adaptive processes approach to strategy
formulating a merger strategy40
Formulating a Merger Strategy
  • Business goals - general or specific, but must be quantifiable to facilitate progress assessment
    • Size objectives
      • Large enough to use fixed factors effectively
      • Critical mass necessary to attain cost levels for profitable operation at market prices
    • Growth objectives - sales, assets, EPS, values
      • To get favorable P/E multiple for shares
      • To increase market to book value of shares
formulating a merger strategy41
Formulating a Merger Strategy
  • Business goals
    • Stability objectives - two kinds of instability
      • Large erratic fluctuations in total size and abrupt program shifts (e.g., defense industry)
      • Cyclical instability of durable goods industries
    • Flexibility objectives - ability to operate in variety of product markets and responsive to consumers
      • Breadth of capabilities, e.g., research, manufacturing, marketing
      • Technological breadth
      • Stay close to customers
formulating a merger strategy42
Formulating a Merger Strategy
  • Aligning firm to changing environments
    • Gap between objectives and potential based on current capabilities
    • Various approaches:
      • Choose products related to needs of customer that provide large markets
      • Focus on technological bottlenecks
      • Be at frontier of technology and aim for attractive product fallout
      • Emphasize economic criteria – ex. value
formulating a merger strategy43
Formulating a Merger Strategy
  • Strategic planning and mergers
    • Diversification strategy may be necessary if firm must alter product-market mix or capabilities to reduce or close strategic gap
    • Both involve evaluation of current capabilities relative to those needed to reach objectives
    • Related diversification involves lower risks
strategy and structure
Strategy and Structure
  • Unitary or U-Form
    • Highly centralized under the president
    • Broken into functional departments - no departments can stand alone
    • No easy way to measure each department as a profit center
    • Allows rapid decision-making
    • Only successful in small organizations
    • Difficult to handle multiple products
strategy and structure45
Strategy and Structure
  • Holding company or H-Form
    • Arranged around various unrelated operating businesses
    • Leadership can evaluate each unit individually
    • Resources can be allocated according to projected returns
strategy and structure46
Strategy and Structure
  • Multidivisional organization (M-form)
    • Each division is autonomous enough to be judged a profit center
    • Divisions share some general staff assistance
    • Can handle related product and geographic market extensions
strategy and structure47
Strategy and Structure

President

  • Matrix form
    • Managers of functional departments such as finance, manufacturing and development
    • Employees are assigned to subunits organized around products, geography, or other criteria
    • Effective in firms characterized by many new products or projects

Product A

Product B

Product C

Research

Manager

Production

Manager

Marketing

Marketing

Manager

valuation and merger analysis
Valuation and Merger Analysis
  • Valuation approaches and tests
    • Comparable companies or transactions
    • Test whether transaction makes sense
    • Test whether premium paid is justified by potential synergies
  • Additional analysis
    • Nature of industry
    • Value drivers (historical and projected)
    • Competitive and antitrust effects of merger
    • Issues related to implementing the merger
trends of strategic alliances in us
Trends of Strategic Alliances in US
  • ExxonMobil =Exxon+ Mobil Oil
  • Hewlett-Packard ; with Compaq
  • Procter & Gamble buy Gillette
  • Adidas-Salomon acquire Reebok
  • Siemens; with Nokia
  • The Walt Disney Company acquiring Pixar
  • Google buys Youtube
  • Warner Bros. Entertainment & CBS Corporation = The CW Television Network
slide51
EU
  • DaimlerChrysler = Daimler Benz + Chrysler
  • BP with Amoco
  • Alcatel+ Lucent Technologies= Alcatel-Lucent
  • Air France +KLM Royal Dutch Airlines = Air France-KLM
  • Lufthansa and SWISS
japan
Japan
  • Mitsubishi UFJ Financial Group
  • Konica Minolta=Konica +Minolta
  • SoftBank acquiring Vodafone Japan
  • Sumitomo Mitsui Banking Corporation = Sumitomo Bank + Sakura Bank
thailand
Thailand
  • EGV + Major = EGV-Major Cineplex
  • Bilsstel + TG Fone
  • LoxInfo + CS = CSLoxInfo
  • GMM + True
  • TMB + IFCT + DTDB