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The Strategic Position
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The Environment
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Macro environment analysis
1. PESTEL framework
2. Key drivers of change
3. Porters Diamond model
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PESTEL Analysis - Political
- Bureaucracy - Tariffs- Corruption - Tax Policy- Political Change - Trade Restrictions- Political Stability - Social/Employment Legislation- Environmental Law- Freedom of the Press- Government Type- Government Stability
- Labour Law- Regulation/Deregulation (NTB)
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Economic
- Business Cycle Stage - Likely Economic Change- Economic Growth - Unemployment Rate- Exchange Rates- Consumers Disposable Income- GDP Growth- Globalisation- GNP Growth- Interest Rates
- Inflation Rate (cost of capital)- Labour Costs- Labour Supply
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Social
- Health Consciousness- Population Growth Rate- Age Distribution- Career Attitudes- Perception of Safety.- Educational Infrastructure- Social Mobility- Employment Patterns
- Attitudes to work- Cultural Taboos
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Technological
- Degree of Automation
- Emerging Technologies
- Impact of Internet, Reduced Communication Costs- Rate of Technological Change
- R&D Activity (SEZs)
- Technology Incentives
- Technology Transfer
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Environmental & Legal
- Weather
- Climate
- Climate Change
Legal- Antitrust Law
- Consumer Law
- Discrimination Law- Employment Law
- Health and Safety Laws
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Key drivers of Change
Ernst & Young finds the six trends are themselves connectedby three key derivers of change:- Demographic shifts. Population growth, increased urbani-zation, a widening divide between countries with youthful
and quickly aging populations and a rapidly growingmiddle class are reshaping not only the business world, butalso society as a whole.- Reshaped global power structure. As the world recovers
from the worst recession in decades, the rise of relationshipsbetween the public and private sectors has shifted thebalance of global power faster than most could haveimagined just a few years ago.
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- Disruptive innovation. Innovations in technologycontinue to have massive effects on business and society.
We're now seeing emerging markets become hotbeds ofinnovation, especially in efforts to reach the growingmiddle class and low-income consumers around the globe.
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Six global trends, interconnected by
three key drivers of change
Source: http://www.ey.com/GL/en/Issues/Business-environment
http://www.ey.com/GL/en/Issues/Business-environmenthttp://www.ey.com/GL/en/Issues/Business-environmenthttp://www.ey.com/GL/en/Issues/Business-environmenthttp://www.ey.com/GL/en/Issues/Business-environment7/28/2019 The Strategic Position
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Porters Diamond model of National
advantage
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Industries and sectors
Porters five forces framework to analyse
source of competition
The dynamics of competition
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Porters Five forces
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Five Forces analysis of The Coca-Cola Companyin relationship to its Coca-Cola brand.
Threat of New Entrants/Potential Competitors:
Medium Pressure
Entry barriers are relatively low for the beverage
industry: there is no consumer switching cost and zerocapital requirement. There is an increasing amount ofnew brands appearing in the market with similarprices than Coke products
Coca-Cola is seen not only as a beverage but also asa brand. It has held a very significant market share fora long time and loyal customers are not very likely totry a new brand.
http://valuationacademy.com/threat-of-new-entrants/http://valuationacademy.com/threat-of-new-entrants/7/28/2019 The Strategic Position
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Threat of Substitute Products: Medium to High
pressure There are many kinds of energy drink s/soda/juice
products in the market. Coca-cola doesnt really have anentirely unique flavor. In a blind taste test, people cant tellthe difference between Coca-Cola and Pepsi.
The Bargaining Power of Buyers: Low pressure The individual buyer no pressure on Coca-Cola Large retailers, like Wal-Mart, have bargaining power
because of the large order quantity, but the bargainingpower is lessened because of the end consumer brandloyalty.
http://valuationacademy.com/threat-of-substitute-products-or-services/http://valuationacademy.com/bargaining-power-of-buyers/http://valuationacademy.com/bargaining-power-of-buyers/http://valuationacademy.com/threat-of-substitute-products-or-services/7/28/2019 The Strategic Position
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The Bargaining Power of Suppliers: Low pressure The main ingredients for soft drink include carbonated
water, phosphoric acid, sweetener, and caffeine. Thesuppliers are not concentrated or differentiated.
Coca-Cola is likely a large, or the largest customer of anyof these suppliers.
Rivalry Among Existing Firms: High Pressure Currently, the main competitor is Pepsi which also has a
wide range of beverage products under its brand. BothCoca-Cola and Pepsi are the predominant carbonatedbeverages and committed heavily to sponsoring outdoorevents and activities.
http://valuationacademy.com/bargaining-power-of-suppliers/http://valuationacademy.com/competitive-rivalry-among-existing-firms/http://valuationacademy.com/competitive-rivalry-among-existing-firms/http://valuationacademy.com/bargaining-power-of-suppliers/7/28/2019 The Strategic Position
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There are other soda brands in the market thatbecome popular, like Dr. Pepper, because of theirunique flavors. These other brands have failed toreach the success that Pepsi or Coke have enjoyed.
Valuation Academy is proud to present ourmeticulously researched and in-depth analysis ofCoca-Cola using Porters Five Forces and a SWOTanalysis availalble for just $4. This 2,500 word, (fully
editable) 10 page word document will be available fordownload after checking out through the link below.
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The dynamics of competition
Incumbent Entrant
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Competitors and Market
1. Strategic group mapping Matrix
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Positioning of competitors
Product Quality
Custo
mersatisfactio
n
Low
High Low
High
P1
P2
P3
P4
P5
Wo
n
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2. Market segment
Type of factors Consumer markets Industrial / organisational
market
Characteristics of people /organisations
Age, sex, race, Income,ethnicity, Family size, Life-cycle stage, Location, Lifestyle
Industry, Location, Size,Technology, Profitability,Management
Purchase / use situation Size of Purchase, Brandloyalty, Purpose of use,Purchasing behaviours,importance of purchase,
Choice criteria
Application, Importance ofpurchase, Volume, Frequencyof purchase, Purchasingprocedure, Choice criteria,
Distribution Channel
Users needs and preferences
for product characteristicsProduct similarity, Pricepreference, Brand preference,Desired features, Quality
Performance requirements ,Assistance from suppliers,Brand preference, Desiredfeatures, Quality, Servicerequirements
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3. Identifying the strategic customers
The strategic customer is the person(s) at whim the
strategy is preliminary addressed because they have
the most influence over which goods or service are
purchased. example: RFL plastic, Diamond world
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Importance of identifying the right strategic customers:- develop product portfolio based on customer- develop product packing- assist to do promotional events or develop advert to
attract target customers in a particular location or media- to hit the sales target- helps to sustainable growth of sales and Profitabilityfor the organisation
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Understanding the customers valuecritical success factors
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
Reputation After sales service Delivery reliability Testing Technical quality
Company A
Company B
Company C
Mostimportant Lessimportant
Perceived value by customers in the electrical goods
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SWOT analysis
Strength Real Estate development: Strong demographic growth and continuous rising of
demand of housing
Steady GDP growth Availability of skill human resources in real estate
development sector in the local market Availability of construction materials in the local market
Broadening economic scope Increasing range of monthly income in the single couple
family
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Weakness Scarcity of land Unavailability of loan financing in the real estate sector Higher inters rate in real estate finance Inadequate infrastructural development
Opportunity Strong growth of young generation along with single
young couple both in urban and rural areas which isdriving the growth of sharp demand of flat or apartment
Introducing new technology
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Introducing affordable and small size of housingconcept to accommodate large population
Scope of implementing long term mortgage finance,
home insurance, mortgage insurance and otherfinancial instruments.
Government has agenda to develop this thrivingindustry to confirm housing for all.
Foreign Direct Investment in real estate sector.
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Threat
Inconsistence of policy and implementation
Natural disaster
Inconsistence of Government policy and administration Economic turmoil
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Offering Question
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Reference books
Johnson, Scholes at el., ExploringCorporate Strategy, FT, Prentice Hall, 8thedition, 2008.
Fred R. David, Strategic Management:Concepts and Cases, Prentice Hall, 12thedition, 2009