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Strategy Framework Summary
Strategy Framework Summary
Strategy Framework Summary
Frameworks
▪ Strategy Diamond
▪ 5 Forces
▪ PESTEL
▪ Ansoff
▪ SWOT
▪ Value Chain Analysis
▪ Market Sizing (Week 4)
▪ BCG Matrix
▪ VARS-Framework
▪ Valuation bubble
▪ CANVAS
▪
Do all for automotive industry
Table of Contents
Advanced Strategy ........................................................................................................... 1
Strategy Diamond..................................................................................................................... 2
Porters 5-Forces ....................................................................................................................... 9
PESTEL-Analysis ...................................................................................................................... 14
Ansoff-Matrix ......................................................................................................................... 21
SWOT-Analysis ....................................................................................................................... 23
Value Chain Analysis ............................................................................................................... 25
Market Sizing ......................................................................................................................... 29
BCG Matrix............................................................................................................................. 30
VARS-Framework.................................................................................................................... 31
Valuation Bubble .................................................................................................................... 33
CANVAS Business Model ......................................................................................................... 34
1
Strategy Diamond
-
o Where will we be active? (Arenas)
o How will we get there? (Vehicles)
o How will we win in the marketplace? (Differentiators)
o What will be our speed and sequence of moves? (Sequencing)
o How will we make our returns? (Economic logic)
- Tipp
o The Strategy Diamond doesn’t only apply to the very top of an
organization. It can apply at all levels of an organization. The executive
board completes a Strategy Diamond for the whole organization.
o Can repeat this at every level of the organization
▪ strategy cascades throughout the organization
▪ forming an integrated strategy at all levels of the organization
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▪ can apply whether you work for a company with 100,000
employees or 1 solo employee.
- 5 Elements of Strategy
o Arena
Where will we be active? – arenas/areas to compete in
▪ Common mistake: to be very generic
• for example, saying, “we want to be the number 1
consulting firm.”
• This is more a vision statement than a strategy.
▪ To avoid this trap, it is important to be very specific when
describing arenas.
▪ You can do this by answering the following questions:
1. Which product categories will we compete in?
2. Which channels will we use?
3. Which market segments will we target?
4. Which geographic areas should we target?
5. Which core technologies will we use?
6. Which value-creation stages will we emphasize?
▪ When specifying these arenas it is important to emphasize their
importance.
▪ For example, suppose your strategy is to focus on a single
geography. You also sell in other geographies. But you do this
because it’s logistically easy, your core strategy is to focus on
one market.
▪ Sort
1. Define product categories
2. Examine market segments to pursue
Market segmentation is the process of dividing your target market into
clearly defined subgroups of consumers who have common
characteristics and priorities. When you identify these segments, you
can tailor your marketing strategy so you are better able to meet your
customer's wants and needs.
3. Estimate size
4. Identify & list any core technologies
5. Describe any other aspects of the arenas , that are
important
o Vehicles
How will you get there?
▪ specify how you are going to get there
▪ determine what vehicle we will use to get from where we are to
where we want to be
▪ Example answers include:
1. Joint ventures
2. Acquisitions
3. Licensing
4. Partnerships
3
5. Franchising
6. Build Inhouse
▪ Again, be as specific as you can. Suppose you identified you
want to enter a new product category (or new tech)
1. You should specify whether you’ll buy this capability or
build it in-house
2. Don’t make this decision on an ad-hoc basis
3. Look to build up a logical strategy
4. If you’ve only ever built in-house, then be honest, admit
acquisition isn’t right for you.
o Differentiators
How will you win the marketplace?
▪ How are you different from the competition?
▪ What are the USPs (Unique Selling Propositions) of your
products?
▪ What is it about what you do that will enable you to win in the
marketplace?
▪ Differentiation must be at the core of your strategy
If you can’t find a way to differentiate yourself, then how can
you win? You can’t.
▪ Some common methods of differentiation include:
1. Price
2. Quality
3. Customization
4. Reliability and durability
5. Speed to market
6. Speed of product updates
7. Customer service
▪ It is important to determine your differentiators as soon as you
can
1. The reason for this is that differentiation doesn’t happen
by magic
2. If you want the best customer service you will have to
spend time and money building that capability
3. Likewise, if you want the best-designed product, you’ll
need to invest in that capability also.
o Staging
What will your sequence of moves be?
▪ First three steps above: We determined what we want to do
▪ In this step: We’ll determine the moves we’ll make to get there
timing and sequencing of major activities
▪ Example:
1. When a general is fighting a war they don’t advance all
armies on all fronts at the same time.
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2. Instead, some advance first, followed by others, and then
others
3. As in war, staging is important in business
4. There are many stories of companies that expanded too
fast, before they were ready.
Most of these companies are no longer around.
▪ Strategy needs to progress from one step to the next.
▪ Risk
1. Getting ahead of yourself
2. Taking on more than you can manage
3. Going out of business.
▪ Key questions to ask during this step are:
1. What sequence of steps should we take?
2. At what speed should we take these steps?
3. Can be influenced by factors such as resources, urgency
and credibility
▪ First Resources: VRIO (to identify resources)
resources could be
1. People
2. Knowledge
3. Technology
4. financial assets
5. market position
6. brand awareness
7. suppliers
8. and more
▪ Next Timing
1. Certain windows of opportunity that dictate your
sequence of events?
2. other circumstances require you to pursue one of your
elements before the others?
▪ Then other aspects of business/project planning
o Economic Logic
How will you generate revenue and make a profit?
▪ The final part of the diamond pulls everything together with one
aim, profit
▪ In a nutshell, this section comes down to competing on a low
cost or high cost basis
▪ You might compete on
1. low cost because
o you have economies of scale
o you have lower replication costs
o …
2. High cost because you have
o great design
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o unique product features
o …
▪ Let’s look at two examples of economic logic to make this clear:
1. Low cost: Ryanair can transport customers at a lower cost
per mile than any other airline in Europe.
2. High cost: Apple can charge higher prices because their
customers are willing to pay more for their unique design.
▪ To have a great strategy the five parts of the diamond must not
only align, they must reinforce each other.
- Example: IKEA
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▪ DIFFERENTIATORS
1. low price
2. reliable quality
3. in-house design
4. instant fulfillment
5. Reliable quality applies not only to the furniture itself but
also the stores, which have a common experience
6. Doesn’t offer the best quality furniture but at least it offers
reliable quality for very low prices
7. It also differentiates itself by offering a massive visually
exciting store where customers can envision the
possibilities of rearranging an incredible amount of
furniture themselves
8. IKEA offers customers the possibility to take home their
desired furniture immediately through an extensive
inventory
9. These are traits many conventional furniture retailers
don’t have.
▪ STAGING
early beachhead in each country, expanding later.
1. IKEA obviously started in Scandinavia with its concept
o decided to expand internationally quite rapidly
o to create economies of scale as quick as possible
and decrease costs per unit
2. Reinforce IKEA’s choice to offer low-cost products
3. IKEA has however done this only one region at a time in
order to learn from every experience and to not get
overwhelmed with potential cultural barriers
4. Moreover, we see that IKEA expanded by targeting
foreign countries with similar cultural backgrounds to its
home country first
5. Then moving on to countries that are culturally more
distant (like Spain, United Arab Emirates and China)
6. IKEA therefore largely followed the so called Uppsala
model approach
o In addition, it only opened one or two stores in
each country in the early stages to enthuse
customers and to see how things would work out.
o Only later, once success was proven in a certain
country, IKEA would expand with more stores.
▪ ECONOMIC LOGIC
comes from economies of scale and replication efficiencies
1. economic logic comes from its economies of scale and
the standarized products its sells worldwide
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2. Practically no other furniture retailer is able to create
similar scale economies and is therefore not able to
charge lower or even similar prices for similar quality
3. All aforementioned decisions on the Arenas, Vehicles,
Differentiators and Staging seem to come together here
to jointly reinforce IKEA’s unique selling point.
o This is very unlike traditional furniture retailers who sell already
assembled furniture. Their furniture is also expensive and fulfillment is
usually slow.
o What makes Ikea’s strategy special is the way each element reinforces
each other.
o For example:
▪ their target market of young people is aligned to their low price
differentiator
▪ their reliable quality shopping experience aligns with wholly
owned stores - it would be impossible to achieve this experience
if they were in partnership.
8
Porters 5-Forces
- Five Forces is a model that identifies and analyzes five competitive forces that
shape every industry and helps determine an industry's weaknesses and
strengths
- identify an industry's structure to determine corporate strategy
- understand the level of competition within the industry and enhance a
company's long-term profitability.
- 5 Forces (w/ example: airlines industry)
o Competition in the Industry (Rivalry)
▪ Number of competitors
▪ Ability to undercut a company
▪ The larger the number of competitors, along with the number of
equivalent products and services they offer, the lesser the power
of a company
▪ Suppliers and buyers seek out a company's competition if they
are able to offer a better deal or lower prices
▪ Conversely, when competitive rivalry is low
1. company has greater power to charge higher prices
2. set the terms of deals to achieve higher sales and profits
▪ Criteria
1. Market growth rates (life cycle)
2. Overcapacity
3. Fixed costs
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4. Similarity of the size and power of the competitors
5. Differentiation of the products/services provided
(switching costs for buyers)
6. Brand loyalty among consumers
7. Barriers to exit (fixed costs of exit, emotional attachment,
government restrictions, etc)
▪ Example – HIGH
1. There are numerous airlines who compete for every route.
2. Since differentiation is low and fixed costs are high, there
is constant pressure for price competition, and to match
improvements in
o Technology
o cabin features
o customer service
o Potential of new entrants into an industry
▪ A company's power is also affected by the force of new
entrants into its market
▪ The less time and money it costs for a competitor to enter a
company's market and be an effective competitor, the more an
established company's position could be significantly
weakened
▪ An industry with strong barriers to entry is ideal for existing
companies within that industry since the company would be
able to charge higher prices and negotiate better terms
▪ Criteria
1. Economies of scale
2. Brand loyalty
3. Start-up capital requirements
4. Switching costs
5. Access to supply and distribution channels
6. Legislation or government action
7. Retaliation (e.g. price cuts and advertising campaigns)
8. Entry deterring price
▪ Example - HIGH
1. The airline industry continues to grow
2. The cost of entry is low with
o ready access to aircraft and financing
o availability of skilled personnel
o access to gates steady stream of new airlines has
entered the industry over the last several decades
3. New airlines often have advantages due to less seniority
of personnel, which lowers wages, and newer aircraft
with greater fuel efficiency
o Bargaining power of suppliers
▪ How easily suppliers can drive up the cost of inputs
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▪ It is affected by the
1. number of suppliers key inputs of a good or service
2. how unique these inputs are
3. how much it would cost a company to switch to another
supplier
▪ The fewer suppliers to an industry, the more a company would
depend on a supplier.
▪ -> Supplier has more power and can drive up input costs and
push for other advantages in trade.
▪ On the other hand, when there are many suppliers or low
switching costs between rival suppliers, a company can keep its
input costs lower and enhance its profits
▪ Criteria
1. Concentration (number and size of the firms)
2. Importance of suppliers’ sales that an industry represents
3. Importance of the buyers in the industry as customers of
the suppliers
4. Differentiation of the product/service and alternative
sources
5. Switching costs
6. The threat of backward integration by the buyer (the
company in analysis)
7. The threat of forward integration by the supplier
▪ Example – HIGH
1. The maior supplier groups to the airline industry are
aircraft, engines, airports, and fuel suppliers
2. Each of the major supplier groups are highly
concentrated and has huge clout
3. Airlines often face high cost of switching suppliers
because of the benefits of fleet compatibility and the
necessity of utilizing major airports
o Bargaining power of customers
▪ The ability that customers have to drive prices lower or their level
of power is one of the Five Forces
▪ Affected by
1. how many buyers or customers a company has
2. how significant each customer is
3. how much it would cost a company to find new
customers or markets for its output
▪ A smaller and more powerful client base means that each
customer has more power to negotiate for lower prices and
better deals
▪ A company that has many, smaller, independent customers will
have an easier time charging higher prices to increase
profitability
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▪ Criteria
1. Concentration (number and size of the firms)
2. Importance of buyers’ purchases to the total volume sold
by the company
3. Differentiation of the product/service and alternative
sources
4. Switching costs
5. The threat of backward integration by the buyer
6. The threat of forward integration of buyers by the
company
7. Access to information
▪ Example – HIGH
1. Despite the fragmentation of buyers, airlines have a hard
time differentiating themselves and creating customer
loyalty
2. switching costs for buyers are nearly non-existent
3. proliferation (untergrabung) of budget airlines
undermines price levels
o Threat of substitutes
▪ Substitute goods or services that can be used in place of a
company's products or services pose a threat
▪ Companies that produce goods or services for which there are
no close substitutes will have more power to increase prices and
lock in favorable terms
▪ When close substitutes are available, customers will have the
option to forgo buying a company's product, and a company's
power can be weakened.
▪ Criteria
1. Relative price/performance of substitutes
2. Switching costs
3. Effectiveness in meeting specific customer needs
4. Willingness of buyers to substitute
5. Product differentiation
6. Brand loyalty
7. Product-for-product substitution (e.g. post mail and e-
mail)
8. Substitution of need (more reliable transports reducing
the need for cars)
9. Generic substitution (disposable income:
boats/homes/furniture/holidays, etc.)
▪ Example – LOW
1. There is no effective substitute for air travel, especially for
longer distances
2. For short haul travel, substitutes include automobile, bus
or rail travel.
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- Example: Under Armour
o Competitive rivalry
▪ Under Armour faces intense competition from Nike, Adidas, and
newer players.
▪ Nike and Adidas, which have considerably larger resources at
their disposal, are making a play within the performance
apparel market to gain market share in this up-and-coming
product category.
▪ Under Armour does not hold any fabric or process patents,
hence its product portfolio could be copied in the future.
o Bargaining power of suppliers
▪ A diverse supplier base limits supplier bargaining power.
▪ Under Armour's products are produced by dozens of
manufacturers based in multiple countries.
▪ This provides an advantage to Under Armour by diminishing
suppliers' leverage.
o Bargaining power of customers
▪ Under Armour's customers include wholesale customers and
end-user customers.
▪ Wholesale customers, like Dick's Sporting Goods, hold a certain
degree of bargaining leverage, as they could substitute Under
Armour's products with those of Under Armour's competitors to
gain higher margins.
▪ The bargaining power of end-user customers is lower as Under
Armour enjoys strong brand recognition.
o Threat of new entrants
▪ Large capital costs are required for branding, advertising, and
creating product demand, which limits the entry of newer
players in the sports apparel market.
▪ However, existing companies in the sports apparel industry
could enter the performance apparel market in the future.
o Threat of substitute products
▪ The demand for performance apparel, sports footwear and
accessories is expected to continue to grow.
▪ Therefore, this force does not threaten Under Armour in the
foreseeable future.
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PESTEL-Analysis
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6. Political movements: What issues are becoming increasingly important to the
people in your target audience? How does this affect their relationship with
your brand?
o Economic
▪ Economic factors relate to the broader economy and tend to
be expressly financial in nature
▪ They include:
1. Interest rates (Zinssatz)
The interest rate is the amount a lender charges a
borrower and is a percentage of the principal—the
amount loaned
2. Employment rates
The employment rate is the percentage of employed
persons in relation to the comparable total population
3. Inflation
4. Exchange rates
a relative price of one currency expressed in terms of
another currency (or group of currencies)
5. Economic growth
6. Disposable income of consumers and businesses
7. Etc.
▪ Many analysts in the financial services sector tend to overweight
economic factors in their analysis since they're more easily
quantified and modeled than some of the other factors in this
framework (which are somewhat qualitative in nature).
▪ Example
1. Employment rates and compensation: Do you have a ready labor market, or
are good team members hard to come by? Which direction is the trend
heading? What do you need to consider in terms of compensation to bring on
and keep talent in your industry?
2. Inflation: How is inflation affecting the price of your materials? How is it
affecting your customers and their spending?
3. Currency devaluations: How is your currency-and the currency of your
customer base-performing? How might this affect your costs and revenue?
4. Stock market and market values: What recent or predicted trends in the stock
market do you see impacting your industry and your organization?
o Social
▪ Social factors tend to be more difficult to quantify than
economic ones
▪ They refer to shifts or evolutions in the ways that stakeholders
approach life and leisure, which in turn can impact commercial
activity
▪ Examples of social factors include:
1. Demographic considerations
2. Lifestyle trends
3. Consumer beliefs
4. Attitudes around working conditions
5. Population growth
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6. age distribution
7. health consciousness
8. career attitudes
9. etc.
▪ Social factors may seem like a small consideration, relative to
more tangible things like interest rates or corporate taxation.
▪ Still, they can have a shockingly outsized impact on entire
industries as we know them
▪ Consider how trends towards healthier and more active lifestyles
have ushered in the evolution of connected fitness
technologies, as well as many changes to the nature of food
products we consume and how these food products are
packaged and marketed.
▪ Examples
1. Employment rates and compensation: Do you have a ready labor market, or
are good team members hard to come by? Which direction is the trend
heading? What do you need to consider in terms of compensation to bring on
and keep talent in your industry?
2. Inflation: How is inflation affecting the price of your materials? How is it
affecting your customers and their spending?
3. Currency devaluations: How is your currency-and the currency of your
customer base-performing? How might this affect your costs and revenue?
4. Stock market and market values: What recent or predicted trends in the stock
market do you see impacting your industry and your organization?
o Technological
▪ must understand how technological factors may impact an
organization or an industry
▪ They include, but are not limited to:
1. Automation
2. How research and development (R&D) may impact both
costs and competitive advantage
3. Technology infrastructure (like 5G, IoT, etc.)
4. Cyber security
5. New ways of producing goods and services
6. New ways of distributing goods and services
7. New ways of communicating with target markets
▪ The speed and scale of technological disruption in the present
business environment are unprecedented, and it has had a
devastating impact on many traditional businesses and sectors
1. think Uber upending the transportation industry
2. advent of eCommerce revolutionizing retail trade as we
know it.
▪ Example
1. Increased emergence of AI: What capabilities do you see as opportunities for
your organization?
2. Energy usage: What new technologies would allow you to save on energy
costs (both to your organization and to the environment)?
3. Cloud software: What developments have been made to cloud storage to
make it more effective, and are you taking advantage of those
16
developments? Conversely, are there security threats to be aware of in this
software for your organization's data?
4. Internet: What improvements are available to maximize speed and reliability
for the online work of your team?
5. Technology usage incentives: Are there incentives available to encourage
certain technology use?
6. New machinery or tech: Are there emerging industry-specific technologies or
equipment that would improve the quality, cost, or efficiency of your
organization's work?
o Environmental
▪ Environmental factors emerged as a sensible addition to the
original PEST framework
▪ business community began to recognize that changes to our
physical environment can present material risks and
opportunities for organizations.
▪ Examples of environmental considerations are:
1. Carbon footprint
2. Climate change impacts, including physical and
transition risks
3. Increased incidences of extreme weather events
4. Stewardship of natural resources (like fresh water)
▪ Environmental factors in a PESTEL analysis will overlap
considerably with those typically identified in an ESG
(Environmental, Social, and Governance) analysis.
▪ Evolved from the growing popularity of movements such as CSR
(Corporate Social Responsibility) and ESG.
▪ Example
1. Climate change: How might short- and long-term effects of climate change,
including rising sea levels and increasing frequency of extreme weather,
impact your organization and customers?
2. Consumption of non-renewable resources: What necessary resources could
become limited or depleted in the future that would impair your business?
3. Energy alternatives: What developments in clean energy might be accessible
and beneficial for your organization?
4. Gas emissions: How does your organization contribute to, and how is it
affected by, gas emissions? What steps could be taken to reduce emissions
and to prepare against the effect of emissions?
5. Natural disasters: What natural disasters pose a threat in your area, or in the
areas where many of your customers are located? How can you be prepared
for these threats?
6. Environmental hazards: What other hazards in your environment could prove
threatening to your organization?
o Legal
▪ Changes to the regulatory environment, which may affect the
broader economy, certain industries, or even individual
businesses within a specific sector
▪ They include, but are not limited to:
1. Industry regulation
2. Licenses and permits required to operate
3. Employment and consumer protection laws
4. Protection of IP (intellectual property)
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5. Health and safety
6. equal opportunities
7. advertising standards
8. consumer rights and laws
9. product labelling and product safety.
▪ Regulation can serve as a headwind (Gegenwind) or a tailwind
(Rückenwind) for operators.
1. An example headwind might be increased capital
requirements for financial institutions
2. An example tailwind is if regulation is so heavy in a
particular industry (let's say food production) that it may
serve as a protective moat for established operators,
creating an additional barrier preventing potential new
entrants.
▪ Example
1. Patent and intellectual rights laws: How might developments or decisions in
intellectual property law affect you and/or your competitors?
2. Protection laws: Are there consumer protection laws that would affect the way
you interact with and do business with your customers?
3. Occupational safety laws: What occupational safety laws do you need to be
aware of to conduct business in a way that protects both your employees and
your organization?
4. Import and export laws: What legal parameters are there for ordering goods
from other countries, as well as for selling your product in other countries?
5. Licenses: What licenses do you, your employees, and your organization need in
order to fill the roles that are needed?
- Starbucks PESTEL Example
o For Starbucks, lowering costs and staying aware and sensitive to the
issues that are important to its customer base are two courses of action
that become clear after an environmental analysis.
o Political
▪ Sourcing raw materials and following fair trade practices, which
has gained a lot of attention from politicians in the West.
▪ Keeping up with laws and regulations in other countries from
which Starbucks buys its raw materials.
o Economic
▪ Economic recession, which has led many customers to seek
cheaper alternatives.
▪ Rising labor and operational costs due to inflation.
o Social
▪ Retiring of the Baby Boomer generation, along with changing
family patterns and lowered birth rates leading to fewer
spending customers.
▪ Changing workstyles and lifestyles, including increased remote
work.
o Technology
▪ Enabling mobile payments, which increases the potential
customer base.
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▪ Agricultural developments that might impact raw material
production.
o Environmental
▪ Natural disasters in countriesthat produce coffee beans.
▪ Environmental laws and regulations related to packaging and
waste.
o Legal
▪ Introduction of caffeine consumption-related policies by health
organizations.
▪ Industry licensing regulations.
- Beyond Meat PESTLE Analysis
o A California-based producer of plant-based meat substitutes, Beyond
Meat is poised to take advantage of many environmental trends that
could provide an opportunity to expand.
o Political
▪ Animal farming is receiving political pressure to cut back on
expansion.
▪ Laws and regulations about greenhouse gas emissions.
o Economic
▪ Vegan meat is projected to grow from 1% to 10% of meat
consumption by the end of the decade.
▪ Vegan meat has the potential to be cheaper than animal
meat, but would need drastic changes to its efficiency to realize
this.
o Social
▪ Rise of veganism in developed countries.
▪ Increasing awareness and vocality of environmentally conscious
citizens.
o Technology
▪ An extensive amount oftechnology in R&D for this industry.
▪ Social media and other technological platforms for advertising
and brand-building.
o Environmental
▪ Soy farming has raised some concerns about deforestation and
soil degradation.
▪ Plant-based products shown to be much moreenvironmentally
friendly than animal meats.
o Legal
▪ New food safety standards to classify plant-based meat
products.
- Amazon PESTLE Analysis Example
o The technology and online retail giant has many opportunities to
capitalize on, with a few threats to monitor.
o Political
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▪ Government pressure on anti-trust and monopolies for major
corporations.
▪ Pressure from the federal government and local government
about employment practices.
▪ Governmental regulations on cybersecurity and privacy
protection.
o Economic
▪ Increasing disposable incomes in developed countries.
▪ Inflation and supply chain issues impacting online stock.
▪ Macro-trend for organizations to seek and purchase cloud
computing productsand solutions.
o Social
▪ Increasing consumerism in developed economies and
emerging economies.
▪ Increasing demand for same-day delivery of products to
consumers.
▪ Increasing dependence on technology, cloud computing, and
AI.
o Technology
▪ Expansion of robotic automation for picking, packing, and
delivery of the product.
▪ Expansion of AI to serve Amazon Web Services.
o Environmental
▪ Increasing energy costs increase the cost of supply chain
delivery.
▪ Environmental impact of plastic and plastic packaging.
▪ Carbon emissions and new fuel options as an organization.
o Legal
▪ Unionization and labor laws impact Amazon's workforce.
▪ Changing import and export regulations.
▪ Import and export tax on goods sold.
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Ansoff-Matrix
▪ Market Penetration
o Selling more of existing products to existing markets
o Strategies may include
▪ price cuts
▪ improved distribution network
▪ increased marketing
▪ production capacity
o Example
▪ Coca-Cola
Coca-Cola has a strong brand identity and has successfully
marketed its products in various countries around the world.
They have also formed partnerships with a variety of distributors
such as supermarkets, restaurants, and bars, to maximize the use
of their distribution channels.
▪ Heineken
Heineken has been successful in penetrating the beer market
through its brand marketing and effective distribution strategies
▪ Product Development
o Developing and selling new products to existing markets
o Strategies may include modifying existing products or launching brand
new products
o Example
▪ Apple
Apple is an example of a company that excels at product
development. With each new iPhone release, they introduce
new features and improvements, making each new iteration
more valuable than the last
▪ Pfizer, Merck & Bayer
invest heavily in research and development to create new and
innovative drugs that can treat illnesses and improve people's
lives.
▪ Market Development
o Selling existing products to new markets
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o Strategies involve targeting new customer segments or expanding
internationally
o Example
▪ IKEA
IKEA is an excellent example of a company that has successfully
implemented a market development strategy
• They have expanded their reach by targeting new
geographic areas and customer segments, all while
continuing to sell their existing products
• IKEA started by expanding to markets relatively close in
terms of culture as to its home country (Sweden) before
targeting more challenging geographic areas such as
China and the Middle-East
• They also have different product lines and designs for
different markets to cater to the local culture and
preferences.
▪ Diversification
o Entering new markets with new products
o Can be classified into concentric/horizontal, conglomerate, and
vertical diversification strategies
o Example
▪ Samsung
Samsung is an example of a company that has diversified its
business by entering various markets with new products.
• Samsung has products ranging from electronics to
insurance, hotels, and chemicals.
• The company has employed both concentric/horizontal
diversification and conglomerate diversification
strategies.
• For example
o Samsung has entered the hospitality market by
building hotels, which is unrelated to their
electronics business.
o At the same time, they have also entered new
markets with related products, such as their range
of smartphones and home appliances. In addition,
o Samsung has also pursued vertical integration, by
taking control over activities that used to be
outsourced to third parties, such as suppliers,
OEMs, and distributors.
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SWOT-Analysis
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o Opportunities
▪ external factors
▪ help the business grow and gain a competitive advantage
▪ Examples
• such as a new market opening up
• changes in regulations
o Threats
▪ external factors
▪ can harm the business
▪ Examples such
• increasing competition
• economic downturns
▪ Example: Automotive Industry
o Strengths
▪ Evolving industry with continuous growth and development
▪ Constant product innovation and technological advancement
▪ Manufacturing facilities in developing nations to control costs
o Weaknesses
▪ Bargaining power of consumers
▪ Government regulations
▪ High employee turnover
o Opportunities
▪ Fuel-efficient vehicles and cost efficiency programs
▪ Changing lifestyle and customer groups
▪ Market expansion, particularly in emerging markets
o Threats
▪ Intense competition among a large number of players
▪ Macroeconomic uncertainty and recession
▪ Volatility in fuel prices and government regulations on
alternative fuels
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Value Chain Analysis
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▪ Product differentiation
investing more time and resources into research and development, design, or
marketing.
▪ Activities
o Primary activities
▪ Inbound logistics: receiving, warehousing, and inventory
management of source materials and components
▪ Operations: turning raw materials and components into a
finished product
▪ Outbound logistics: distribution, including packaging, sorting,
and shipping
▪ Marketing and sales: marketing and sale of a product or
service, including promotion, advertising, and pricing strategy
▪ After-sales services: activities that take place after a sale has
been finalized, including installation, training, quality assurance,
repair, and customer service
o Secondary activities
▪ Procurement: sourcing of raw materials, components,
equipment, and services
▪ Technological development: research and development,
including product design, market research, and process
development
▪ Human resources management: recruitment, hiring, training,
development, retention, and compensation of employees
▪ Infrastructure: company’s overhead and management,
including financing and planning
▪ How 2 Apply
o Identify Value Chain Activities
▪ Determine all the activities involved in creating your product or
service, including primary and secondary activities.
▪ Identify the inputs and outputs of each activity.
▪ Map out the sequence of activities, from inputs to final product
or service.
o Determine the Cost and Value of Activities
▪ For each activity, assess the costs and value it adds to the final
product or service.
▪ Identify the direct costs, such as labor and materials, as well as
indirect costs like overhead expenses.
▪ Analyze the value of each activity, considering how it increases
customer satisfaction or benefits the company.
o Analyze the Value Chain
▪ Look for ways to optimize the value chain, such as reducing
costs or enhancing value.
▪ Evaluate the performance of each activity, including
opportunities for improvement.
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▪ Consider how improvements to secondary activities can benefit
primary activities.
o Identify Opportunities for Competitive Advantage
▪ Use the value chain analysis to identify areas where the
company can create a competitive advantage.
▪ Determine which activities offer the greatest potential for
differentiation or cost reduction.
▪ Prioritize improvements based on their potential for return on
investment.
o Implement and Monitor Changes
▪ Develop an action plan for implementing improvements to the
value chain.
▪ Monitor the results of the changes and adjust as necessary.
▪ Continuously evaluate the value chain to identify new
opportunities for improvement.
▪ Example: Value chain analysis example for a common supermarket
o Primary activities
▪ Inbound logistics
The cost of inbound logistics is very low at 2 percent, which is
below half of the industry average. This suggests that the
company has strong bargaining power with its suppliers and/or
it has implemented efficient processes to manage the inbound
flow of goods.
▪ Operations
The supermarket is open 9 a.m. to 9 p.m., seven days a week.
This suggests that the company is maximizing its use of resources
and increasing its production and distribution capabilities.
▪ Outbound logistics
The supermarket has a strong presence of distribution centers,
which means that it is able to distribute products quickly and
efficiently.
▪ Marketing/sales
The company uses an everyday low price strategy and cash
and carry approach to attract customers.
▪ Service
The company has a quick response time and a no-questions-
asked return policy, which adds customer value and brand
credibility.
o Secondary activities
▪ Business infrastructure
The company has 400+ truck tractors and 30,000-square-foot
stores in small towns. This suggests that the company has a
strong infrastructure to support its operations.
▪ Human resources management
The company has top management in-store, refers to its
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employees as associates, offers incentives, profit sharing, and
stock options, and has a decentralized organizational structure.
This suggests that the company values its employees and has
implemented a people-focused management approach.
▪ Technology development
The company uses the Uniform Product Code at point of sale,
cross-docking, and a satellite network to improve efficiency and
accuracy in its operations.
▪ Procurement
The company has strong bargaining power with its vendors and
no one vendor accounts for more than 2.8 percent of total
purchases. This suggests that the company is able to negotiate
favorable terms with its suppliers.
o Based on the low cost of inbound logistics and strong service
performance, the company could focus on a cost advantage strategy
to lower its costs and increase its profitability.
o One opportunity for improvement could be re-examining the return
policy, which adds a significant cost to the company.
o The company could limit returns to non-perishable items only to
reduce losses while still maintaining its brand credibility.
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Market Sizing
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BCG Matrix
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VARS-Framework
At example
▪ V - Value Proposition
o Warby Parker offers fashionable, high-end glasses at an affordable
price.
o The company's entry-level frames are priced at $95, with prescription
lenses included.
o The company's mission is to offer designer eyewear at a revolutionary
price while leading the way for socially conscious businesses.
o Warby Parker has a risk-free 30-day return policy and free shipping.
▪ A - Activities, Resources, and Capabilities
o Warby Parker's Home Try-On program on its e-commerce platform is
one of the main reasons for its success.
o The program allows customers to try on five frames for five days before
sending them back.
o Warby Parker now operates 125 retail stores across North America,
offering in-store experiences and additional services.
o The company has launched a virtual try-on feature through their app
that uses augmented reality to allow customers to see their selected
frames on their own face.
o Warby Parker donates one pair of glasses to Vision Spring for every pair
sold and is the only 100% carbon-neutral eyewear brand in the world.
o The company works with Verite to ensure fair labor practices and
happy employees in its factories.
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▪ R - Revenue Model
o Warby Parker has established vertical integration by designing its
frames in-house, manufacturing the acetate frames in the same
Chinese factories as its competitors, and polishing and inserting lenses
into frames in domestic optical labs.
o The company is able to keep costs low by negotiating directly with its
partners.
▪ S - Key Enterprise Scope
o Warby Parker appeals to younger generations who are tech-savvy,
socially conscious, and looking for a lower-priced, fashionable
eyewear alternative.
o The brand has been successful due to its revolutionary e-commerce
model, low-cost structure through vertically integrated supply chains,
and donation program.
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Valuation Bubble
▪ Occurs when the price of an asset rises rapidly and significantly above its
fundamental value
▪ Can be caused by excessive optimism, low interest rates, or speculation
▪ Boom and Bust:
o Refers to the recurring pattern of economic growth (boom) followed
by a period of contraction (Abnahme) (bust)
o Economic growth is cyclical and periods of growth are inevitably
(unweigerlich) followed by periods of contraction
o Boom phase
▪ high levels of growth, rising asset prices, and general optimism
▪ Can lead to excessive risk-taking, speculation, and over-
investment
o Correction occurs when the market becomes overheated, leading to
a period of contraction or bust
o Bust phase
▪ asset prices fall, businesses and individuals face financial
difficulties, and economic growth slows down
▪ Can lead to a recession or even a depression
▪ Government and central bank policies
o Aimed at regulating the economy and financial markets
o May increase interest rates or implement stricter lending standards to
discourage excessive risk-taking and speculation
o Intended to prevent excessive boom and bust cycles
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CANVAS Business Model
▪ Value Proposition
o Fundamental concept of exchange of value between business and
customer
o Solve customer problems/pain in exchange for money
o Questions to ask
▪ What problem am I solving?
▪ Why would someone want this problem solved?
▪ What motivates this problem?
o Approach customer segments based on Maslow's Hierarchy of Needs
o If selling to other businesses, understand their goals and where your
business fits in their value chain
▪ Customer Segments
o Practice of dividing a customer base into similar groups
o Questions to ask
▪ Who are we solving the problem for?
▪ Who will value my value proposition?
▪ What are the characteristics of those businesses/people?
o Gauge and understand market size
o Create customer personas to better understand customer segments
▪ Customer Relationships
o How a business interacts with its customers
o Examples: In-person, third-party contractors, online, events, phone
o Create a user journey map to clarify points of engagement and
identify opportunities for automation
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▪ Channels
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