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6
Business Growth
and Strategy
6
Business Growth
and Strategy
Strategic management
strategic and day-to-day management
the components of strategic management
strategic analysis
strategic choice
strategic implementation
Importance of the business environment
PEST analysis
Strategic management
strategic and day-to-day management
the components of strategic management
strategic analysis
strategic choice
strategic implementation
Importance of the business environment
PEST analysis
Strategic AnalysisStrategic Analysis
Strategic AnalysisStrategic Analysis
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
Industry competitors
Porter's Five Forces ModelPorter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
Industry competitors
Rivalry amongexisting firms
Porter's Five Forces ModelPorter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
Potentialentrants
Industry competitors
Rivalry amongexisting firms
Threat ofnew entrants
Porter's Five Forces ModelPorter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
Substituteproducts
Potentialentrants
Industry competitors
Rivalry amongexisting firms
Threat ofnew entrants
Threat ofsubstitutes
Porter's Five Forces ModelPorter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
Suppliers
Substituteproducts
Potentialentrants
Industry competitors
Rivalry amongexisting firms
Threat ofnew entrants
Bargaining powerof suppliers
Threat ofsubstitutes
Porter's Five Forces ModelPorter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
BuyersSuppliers
Substituteproducts
Potentialentrants
Industry competitors
Rivalry amongexisting firms
Threat ofnew entrants
Bargaining powerof suppliers
Bargaining powerof buyers
Threat ofsubstitutes
Porter's Five Forces ModelPorter's Five Forces Model
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)
Strategic AnalysisStrategic Analysis
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
factors affecting each of the forces
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
factors affecting each of the forces
Strategic AnalysisStrategic Analysis
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
factors affecting each of the forces
limitations of the five forces model
Porter's five forces model
the five forces
the bargaining power of suppliers
the bargaining power of buyers
the threat of potential new entrants
the threat of substitutes
the extent of competitive rivalry
factors affecting each of the forces
limitations of the five forces model
Strategic AnalysisStrategic Analysis
Value chain analysis nature of value chain analysis primary activities
inbound logisticsoperationsoutbound logisticsmarketing and salesservice
secondary activitiesprocurement technological developmenthuman resources management firm infrastructure
Value chain analysis nature of value chain analysis primary activities
inbound logisticsoperationsoutbound logisticsmarketing and salesservice
secondary activitiesprocurement technological developmenthuman resources management firm infrastructure
Inboundlogistics
The value chainThe value chain
Operations
Outboundlogistics
Marketingand sales
After-salesservice
Fir
min
fras
tru
ctu
re
Tech
no
log
ical
develo
pm
ent
Hu
man
res
ou
rce
man
agem
ent
Pro
curem
ent
Strategic ChoiceStrategic Choice
Environment or market-based strategy types
cost leadershipdifferentiation focus
importance of establishing:- the basis of a firm's competitive advantages the nature of the target market
Resource-based strategy exploiting core competencies defining & establishing core competencies
Environment or market-based strategy types
cost leadershipdifferentiation focus
importance of establishing:- the basis of a firm's competitive advantages the nature of the target market
Resource-based strategy exploiting core competencies defining & establishing core competencies
Growth by internal expansion product differentiation
vertical integration
diversification
Growth by external expansion: mergers and takeovers horizontal mergers
vertical mergers
conglomerate mergers
Growth by internal expansion product differentiation
vertical integration
diversification
Growth by external expansion: mergers and takeovers horizontal mergers
vertical mergers
conglomerate mergers
Growth StrategyGrowth Strategy
Alternative growth strategyAlternative growth strategy
GROWTH OF A FIRM
Internal expansion External expansion
(1) DifferentiationHorizontal expansion
(same product, increasein market share)
(1) Horizontal integrationMergers of firms
producing the sameproduct
(2) Vertical integrationDifferent products, butbelonging to different
stages of same product
(2) Vertical integrationMergers of firms producing at different stages of same
process
(3) ConglomerateDiversification -
introduction of totally different products
(3) ConglomerateDiversification - merger of
firms producing totally unrelated products
Growth StrategyGrowth Strategy
Growth by internal expansion
financing internal growth
borrowing
share issue
ploughing-back profit
the takeover constraint
Growth by internal expansion
financing internal growth
borrowing
share issue
ploughing-back profit
the takeover constraint
Growth StrategyGrowth Strategy
Growth by internal expansion (cont.) growth through vertical integration
backward integration ('upstream' integration) forward integration ('downstream' integration)
why vertically integrate? economies of scale reduced uncertaintymonopoly power
• barriers to entry growth through diversification
advantages• when existing market is saturated• spreads risks
Growth by internal expansion (cont.) growth through vertical integration
backward integration ('upstream' integration) forward integration ('downstream' integration)
why vertically integrate? economies of scale reduced uncertaintymonopoly power
• barriers to entry growth through diversification
advantages• when existing market is saturated• spreads risks
Growth StrategyGrowth Strategy
Growth through mergers and takeovers types of merger and takeover
horizontalverticalconglomerate
motives for mergers and takeoversgrowtheconomies of scalemonopoly power increased market valuation reduced uncertaintyother motives
effects of mergers on consumers
Growth through mergers and takeovers types of merger and takeover
horizontalverticalconglomerate
motives for mergers and takeoversgrowtheconomies of scalemonopoly power increased market valuation reduced uncertaintyother motives
effects of mergers on consumers
Financing Growth and InvestmentFinancing Growth and Investment
Sources of business finance internal sources
ploughed-back profit
external sources banks
• mainly short- and medium-term finance
stock market
• longer-term finance
problem of 'short-termism'
international sources
Sources of business finance internal sources
ploughed-back profit
external sources banks
• mainly short- and medium-term finance
stock market
• longer-term finance
problem of 'short-termism'
international sources
The role of the Stock Exchange primary market secondary market advantages
brings together savers & firms seeking finance regulates firms and helps encourage confidence facilitates mergers and takeovers reduces transaction costs of investment finance
disadvantagescost of getting listedpossible short-termism and instability
The role of the Stock Exchange primary market secondary market advantages
brings together savers & firms seeking finance regulates firms and helps encourage confidence facilitates mergers and takeovers reduces transaction costs of investment finance
disadvantagescost of getting listedpossible short-termism and instability
Financing Growth and InvestmentFinancing Growth and Investment
Is the stock market efficient?
the efficient market hypothesis
share prices reflect information about companies' current and expected future performance
implications of stock market efficiency
benefit of speculation diminishes as efficiency increases
perfect efficiency and share prices following a 'random walk'
Is the stock market efficient?
the efficient market hypothesis
share prices reflect information about companies' current and expected future performance
implications of stock market efficiency
benefit of speculation diminishes as efficiency increases
perfect efficiency and share prices following a 'random walk'
Financing Growth and InvestmentFinancing Growth and Investment
Staying SmallStaying Small
EU definition of SMEs
by number of employees
micro enterprises
small enterprises
medium enterprises
by turnover
EU definition of SMEs
by number of employees
micro enterprises
small enterprises
medium enterprises
by turnover
EU SME definitionsEU SME definitions
EU SME definitionsEU SME definitions
EU SME definitionsEU SME definitions
EU SME definitionsEU SME definitions
Staying SmallStaying Small
Competitive advantage and small firms flexibility quality of service production efficiency and low overheads product development and innovation
Problems facing small businesses selling and marketing funding R&D management skills less ability to gain economies of scale
Competitive advantage and small firms flexibility quality of service production efficiency and low overheads product development and innovation
Problems facing small businesses selling and marketing funding R&D management skills less ability to gain economies of scale