The document summarizes strategic analysis conducted by Orange Mobile Company. It discusses how Orange analyzed competitors globally to develop a profitable strategic plan. This involved forming strategic alliances and considering company resources. Through increased services, sales and a focus on global expansion, Orange was able to attract more customers and gain profits. The strategic analysis process of segmenting markets and developing strategies for each segment allowed Orange to benefit from systematically analyzing the market scenario.
The document summarizes strategic analysis conducted by Orange Mobile Company. It discusses how Orange analyzed competitors globally to develop a profitable strategic plan. This involved forming strategic alliances and considering company resources. Through increased services, sales and a focus on global expansion, Orange was able to attract more customers and gain profits. The strategic analysis process of segmenting markets and developing strategies for each segment allowed Orange to benefit from systematically analyzing the market scenario.
The document summarizes strategic analysis conducted by Orange Mobile Company. It discusses how Orange analyzed competitors globally to develop a profitable strategic plan. This involved forming strategic alliances and considering company resources. Through increased services, sales and a focus on global expansion, Orange was able to attract more customers and gain profits. The strategic analysis process of segmenting markets and developing strategies for each segment allowed Orange to benefit from systematically analyzing the market scenario.
The document summarizes strategic analysis conducted by Orange Mobile Company. It discusses how Orange analyzed competitors globally to develop a profitable strategic plan. This involved forming strategic alliances and considering company resources. Through increased services, sales and a focus on global expansion, Orange was able to attract more customers and gain profits. The strategic analysis process of segmenting markets and developing strategies for each segment allowed Orange to benefit from systematically analyzing the market scenario.
MBA 401 (Core) LECTURE I [CASE STUDY] Orange Mobile Company STRATEGIC ANALYSIS IN ORANGE MOBILE COMPANY The evolution of mobile phones industry is rapidly growing to invent credit card size phones from old brick size phones. The changing trend in the market has made the companies to invent high-end technology phones that most of the teenagers enjoy. Orange mobile company, one of the mobile industries was established in April 1994. The aim of the company was to become the top mobile provider by making communication instinctive and easily accessible part of daily life. The top level management in the company applied strategy analysis for analysing the market competitor across the glob in order to conceptualise a profitable plan. STRATEGIC ANALYSIS IN ORANGE MOBILE COMPANY After analysis the various competitors, the company decide to make strategic alliance with worlds leading suppliers and operators. It also considered the current scenario of the company resources in terms of employees, equipment finance and others. This made the company attract more customers and outlook businesses in all areas of telecommunication. Therefore, an increase demand of services led to the increase in sales. The next aim of the company was to expand globally; hence it introduced strategic planning based on marketing. STRATEGIC ANALYSIS IN ORANGE MOBILE COMPANY Considering the global market scenario, the company emphasized strategic planning and later strategic analysis was enhanced to make the process effective. This process involved segmenting the market, profiling market segments, and developing marketing strategy to each of the market segments. Thus the company benefited in gaining profits by systematically analysing the market scenario and expanded globally. Questions to discuss: Why do you think the company introduced strategic analysis as the key concept in gaining profits? How did the company benefit through strategic analysis? INTERNAL AND EXTERNAL ANALYSIS | UNIT II LECTURE II [ENVIRONMENTAL APPRAISAL] WHAT ENVIRONMENT REFERS? INTERNAL Resources and behavior Strengths and weaknesses Synergistic efforts Competencies It is the way of avoiding external threats to protect the organization. EXTERNAL Social Political Economical Legal Technological It helps an organization to think what it might choose to do.
WHY ENVIRONMENTAL APPRAISAL (EA)? EA finds the sources of any opportunity or threat
EA helps management to decide the strategy for implementation and predict the discovered future opportunities or threats CONCEPT OF EA EA is the planning process that helps: In monitoring economic conditions, Government rules, Technology issues, Market settings, EA is important for the evaluation of the present strategy, setting objectives, for planning for future. EA PROCESS EFFECT OF CHANGING ENVIRONMENT Dynamic social and economical conditions, Problem of increased competition, Obsolescence of machines and equipment, Inference of Govt., and Increasing costs and prices. NEED FOR EA Know the threats, New resources, Competitors, Know the policies of other companies. OBJECTIVES OF EA Detecting important economic, social, cultural, technological and political issues Potential opportunities and threats for the organisation due to environmental variables Accurate understanding of organisations strengths and limitations Providing a basis for analysis of future programme investments COMPONENTS OF EA Analysis of environmental variables (PLEST) Communit y Analysis Market Analysis Competito r Analysis Supplier Analysis Selection of strategic factors opportunities and threats ENVIRONMENTAL SCANNING TECHNIQUES ETOP (Environmental threats and opportunities) QUEST (Quick env. scanning technique) SWOT EFE (External factor evaluation) matrix CPM (Competitive Profile Matrix) ENVIRONMENTAL THREAT AND OPPORTUNITY PROFILE(ETOP) ETOP was developed by GLUECK, is that of preparing Environmental Threat and Opportunity Profile(ETOP) for an organization. The preparation of ETOP involves the following steps: i. Dividing the environment into different sectors. ii. Analyzing the impact of each sector on the organization. iii. Analyzing the impact of each sub-factor on the organization in the form of a statement. iv. Preparing a summary to show major factors. IMPORTANCE OF ETOP: It provides clear picture to strategists, which sectors has a favorable impact on organization. It helps an organization in being aware about where it stands with respect to its environment. It helps an organization in formulating an appropriate strategy. ETOP PRESENTED IN TWO FORMS: Matrix Form : In matrix form , importance and impact of various environmental factors are presented in tabular form and are often quantified Descriptive Form: In descriptive form impact of various factors is described in terms their being positive or negative. M A T R I X
F O R M
Sr. NO . ENVIRO.FACTOR S DEGREE OF IMPORTANCE DEGREE OF IMPACT High 3 Medium 2 Low1 + - (3) +-(2) +-(1) 1. Economic components 2. Socio-cultural components 3. Competitive components 4. Technological components D E S C R I P T I V E
(+)Continued emphasis on infrastructure development including power supply for industry, transport and domestic consumption (-) severe resource constraints Supplier (-)Increasing scarcity of technology Government (+) liberalization of technology import Technological (+) higher growth in industrial production and technology up- gradation ETOP PREPARED FOR MOTOR CAR MANUFACTURE ENVIRONMENT AL FACTORS IMPACT (+) Opportunity(-) Threats Technology (+)Niche market for high end market (+) free import from cheaper markets (+) vast, growing, educating youth preferring fuel efficient and sleek models Economic (+) rising income levels (-) price competition from local as well as international brands (-) poor transportation services Social (+) buyer preferences for sporty, fashionable and durable models (-) high transport accidents forcing people to opt for safer modes of transportation LECTURE III [EXTERNAL APPRAISALS] QUICK ENVIRONMENTAL SCANNING TECHNIQUE (QUEST) It was proposed by B NANUS. It is a four steps process uses scenario-writing for scanning the environment and identified strategic options i. Strategists make observation about major events and trends in the industry ii. Strategists speculate on a wide range of important issues iii. The QUEST director prepares a report iv. Identify feasible strategic options EXTERNAL FACTOR EVALUATION (EFE) MATRIX An External Factor Evaluation (EFE)Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, political, governmental, legal, technological, and competitive information.
CPM The Competitive Profile Matrix (CPM) identifies a firms major competitors and its particular strengths and weaknesses. The weights and total weighted scores in both a CPM and an EFE have the same meaning. The critical success factors in a CPM are not grouped into opportunities and threats as they are in an EFE. In a CPM, the ratings and total weighted scores for rival firms can be compared to the sample firm. This comparative analysis provides important internal strategic information.
ORGANIZATIONAL APPRAISAL Internal Environment - strength & weakness in different functional areas Organization capability - Capacity & ability to use distinctive competencies to excel in a particular field - Ability to use its S & W to exploit O & face T in its external environment Organization resources - Physical & human - cost, availability - strength / weakness ORGANIZATIONAL APPRAISAL
Identity & character of an organization leadership, Mgt. Philosophy, values, culture, quality of work environment, Organization climate, organization politics etc.
Resource Behaviour
Distinctive competence METHODS & TECHNIQUES USED FOR ORGANIZATIONAL APPRAISAL Financial Analysis - Ratio Analysis, EVA, ABC Key factor rating - Rating of different factors through different questions Value chain analysis VRIO framework METHODS & TECHNIQUES USED FOR ORGANIZATIONAL APPRAISAL
Marketing Capability Hindustan Lever - Distribution Channel IDBI/ICICI Bank - Wide variety of products EXAMPLES OF ORGANIZATIONAL CAPABILITY PROFILE Operations Capability Lakshmi machine works - absorb imported technology Balmer & Lawrie - R&D - New specialty chemicals
Personnel Capability Apollo Tyres - Industrial relations problem LECTURE IV [INTERNAL APPRAISALS] VRIO FRAMEWORK Value : Does it provide competitive advantage? Rarity: Do other competitors possess it? Imitability: Is it costly for others to imitate? Organisation : Is the firm organised to exploit the resource? BALANCED SCORECARD- KAPLAN & NORTON 4 performance measures Customer perspective Internal business perspective Innovation & learning perspective Financial perspective Balanced Scorecard Balanced Scorecard A model integrating financial and non financial measures. (Kaplan & Norton 1996)
Causal link between outcomes and performance drivers of such outcomes
Translates the vision and strategy of a business unit into objectives and measures in 4 distinct areas Financial Customer Internal Business process Learning and growth
THE BALANCED SCORECARD Purpose of Balanced Scorecard:
A method of implementing a business strategy by translating it into a set of performance measures derived from strategic goals that allocate rewards to executives and managers based on their success at meeting or exceeding the performance measures. Financial Perspective How do we look to our Shareholders? Customer Perspective How do our customers look at us? Learning and Growth Perspective How can we continue to improve? Internal Business Perspective What we must excel at? Casual link between the measures PORTFOLIO ANALYSIS 27% of fortune 500 companies use it in strategy formulation Top management views its product lines and business units as a series of investment return Product lines/Business units - a portfolio of investment - company constantly juggle - to get yield
STRATEGIC ADVANTAGE PROFILE (SAP) A picture of the more critical areas which can have a relationship of the strategic posture of the firm in the future. Capability Factor Competitive strengths / Weakness
Finance High cost of capital, reserves & surplus
Marketing Fierce competition, company position secure
Operational P&M - excellent - parts & components available STRATEGIC ADVANTAGE PROFILE (SAP) Capability Factor Competitive strengths / Weakness
Personnel Quality of management & personnel par with competition
General High Quality experienced top management - take proactive stance
BCG GROWTH - SHARE MATRIX Matrix of - Growth rate of the industry - % of increase in sales - Market share Relative market share of a firm = Market share in industry/market share of the largest other competitor > 1 indicates market leader Assumption: Other things equal - growing market is attractive BCG GROWTH - SHARE MATRIX
STARS QUESTION MARKS BUSINESS 16 GROWTH 12 RATE 8 CASH COWS DOGS (%) 4 0 10 4 2 1.5 1 0.1 RELATIVE COMPETITIVE POSITIONING GE PORTFOLIO MATRIX Industry attractiveness Companys business strengths/Competitive position Industry attractiveness - market growth rate, industry profitability, size, pricing practices, opportunities/ threats scale 1 - 5 Very unattractive to very attractive Business strengths - Market share, technological position, profitability, size, strengths & weakness scale 1-5, 1- very weak, 5 - very strong Product line - a letter, circle - area - (size - scales) pie - market share Identify performance group - current & projected portfolio without any change in strategy LECTURE V [5-FORCE MODEL & 7-S] PORTERS FIVE FORCES MODEL Developed by Michael Porter in 1979/1980 Considered a classic industry analysis tool Provides a framework for perspective on multiple competitive factors affecting your company and industry Five basic competitive forces whose collective strength determines the long-run profit potential of an industry THE FIVE FORCES Threat of New Entrants/ Barriers to Entry Bargaining Power of Customers Threat of Substitutes Bargaining Power of Suppliers Rivalry Among Existing Competitors Sources for this section: Michael E. Porter, Understanding Industry Structure, Revised 2007 and How Competitive Forces Shape Strategy, Harvard Business Review, 1979 THREAT OF NEW ENTRANTS/BARRIERS TO ENTRY Threat of potential entrants determined by: Attractiveness of industry Height of entry barriers (e.g., start-up costs, regulation, etc.) Customer switching costs (high fixed costs involved in switching to another supplier) Capital requirements (e.g., very high in gas exploration) Incumbency advantages independent of size (e.g., proprietary technology, patents) Unequal access to distribution channels (how much have existing competitors tied up distribution channels) Restrictive government policy BARGAINING POWER OF SUPPLIERS Strength of suppliers determined by: Number of suppliers and their degree of differentiation Portion of a firms inputs obtained from a particular supplier Portion of a suppliers sales sold to a particular firm Switching costs Potential for vertical integration
BARGAINING POWER OF SUPPLIERS A supplier group is powerful if: It is more concentrated than the industry it sells to (e.g., Microsoft: near-monopoly in operating systems, with fragmentation among PC-making customers) Industry participants face high switching costs when changing suppliers Differentiated products offered by suppliers No substitutes for what the supplier group offers Supplier group does not depend heavily on a particular industry POWER OF CUSTOMERS Power of customers determined by: Number of buyers Firms degree of differentiation Portion of a firms inputs sold to a particular buyer Portion of a buyers purchases bought from a particular firm Switching costs Potential for vertical integration
THREAT OF SUBSTITUTES A substitute performs the same function as an industrys product or service, but by a different means Determined by the number of potential substitutes, their closeness in function and relative price Not just another product: sometimes the substitute is to do without the product or to do it themselves Long distance phone service providers vs. VoIP providers (Skype and Vonage) Mobile phone as primary phone vs. landline RIVALRY AMONG EXISTING COMPETITORS Rivalry determined by number of firms, relative size, degree of differentiation between firms, demand conditions and barriers to exit Competition among rivals is greatest when: There are many competitors, nearly equal in size or power Slow industry growth High barriers to exit MCKINSEYS 7S FRAMEWORK TO DIAGNOSE CAUSES OF ORG PROBLEM & FORMULATE PROGRAM
Structure
Superordinate Goals Strategy Skills System Style Staff MCKINSEYS 7S FRAMEWORK Style One of the levers which top management can use to bring about organization Change
Staff Update knowledge & skills to keep pace with change MCKINSEYS 7S FRAMEWORK Strategy Includes purpose, mission, objectives, goal, action plans & policies
Systems Procedures & methods framed by organization & followed by operational personnel in the respective functional area MCKINSEYS 7S FRAMEWORK Structure Relationship between/ among various positions and activities Design of structure - critical task for top mgmt.
Skills Acquainted with state of the art technology & improvised methods & practices MCKINSEYS 7S FRAMEWORK
Superordinate Goals
Fundamental ideas of business Main values Broad notions of future directions TOWS Matrix Internal
External (S) List 5-10 Internal strengths (W) List 5-10 Internal Weakness (O) List 5-10 External Opportunities (T) List 5-10 External Threats SO Strategies Use S to take advantage of O WO Strategies Take advantage of O by overcoming W ST Strategies Use S to avoid T WT Strategies Minimize W and avoid T - Generate Alternative Strategies APPLICATION OF GAME THEORY IN STRATEGY FORMULATION 'Game Theory' is a concept that deals with the formulation of the correct strategy, when confronted by a complex challenge, to succeed in addressing that challenge. It was developed based on the premise that for whatever circumstance, or for whatever 'game', there exists a strategy that will allow one to 'win. Any business is a game played against competitors, or even against customers. APPLICATION OF GAME THEORY IN STRATEGY FORMULATION Invented by John von Neumann and Oskar Morgenstern in 1944. Game Theory is an important tool in any strategist's toolbox, especially when dealing with a situation that involves several entities whose decisions are influenced by what decisions they expect from other entities. APPLICATION OF GAME THEORY IN STRATEGY FORMULATION Game Theory has several important elements, some of which are: 1) the agent, which refers to a person or entity who have their own goals and preferences; 2) the utility, which is an abstract concept that indicates the amount of satisfaction that an agent derives from an object or an event; APPLICATION OF GAME THEORY IN STRATEGY FORMULATION 3) the game, which pertains to a situation participated in by several agents (now referred to as 'players', since they're in a game), each of whom is trying to maximize his utility of the game by anticipating the actions of the other players and responding to them correctly; 4) the information, which is what a player knows about what has already happened in the game, and which can be used to come up with a good strategy; 5) the representation, which characterizes the order of play employed in the game; and 6) the equilibrium, which is an outcome of or a solution to the game. APPLICATION OF GAME THEORY IN STRATEGY FORMULATION In 1950, Albert Tucker of Princeton University invented the Prisoner's Dilemma, an imaginary scenario that is undoubtedly one of the most famous representations of Game Theory. PRISONERS DILEMMA Two suspects arrested for a crime Prisoners decide whether to confess or not to confess If both confess, both sentenced to 3 months of jail If both do not confess, then both will be sentenced to 1 month of jail If one confesses and the other does not, then the confessor gets freed (0 months of jail) and the non-confessor sentenced to 9 months of jail What should each prisoner do? 71 BATTLE OF SEXES A couple deciding how to spend the evening Wife would like to go for a movie Husband would like to go for a cricket match Both however want to spend the time together Scope for strategic interaction GAMES Normal Form representation Payoff Matrix
Confess Not Confess Confess -3,-3 0,-9 Not Confess -9,0 -1,-1 Movie Cricket Movie 2,1 0,0 Cricket 0,0 1,2 Prisoner 1 Prisoner 2 Wife Husband NASH EQUILIBRIUM A new concept related to Game Theory is the Nash equilibrium, which was developed by John Nash for his PhD thesis. In a game, players would tend to change strategies from time to time to improve their respective positions. The Nash Equilibrium is the point at which no player can improve his or her position in the game by changing strategy. In the Prisoner's Dilemma, the Nash Equilibrium is the point at which both prisoners confess, since whoever changes this strategy will be sent to a long prison term, instead of an intermediate one. NASH EQUILIBRIUM Each players predicted strategy is the best response to the predicted strategies of other players No incentive to deviate unilaterally Strategically stable or self-enforcing
Confess Not Confess Confess -3,-3 0,-9 Not Confess -9,0 -1,-1 Prisoner 1 Prisoner 2 UNIT III COMPETITIVE ADVANTAGE