STRATEGIC PLANNING IN DYNAMIC ENVIRONMENTS (MGT30005)
– WEEK 3 –
§ www.swinburne.edu.au/news/latest- news/2020/01/updates-on-coronavirus- .php
§ 15 March – 7pm AEDT
§ Any Swinburne student or staff member required to self-isolate will be supported and offered flexible learning or working arrangements where possible.
§ Universities and schools will stay open for the time being.
§ At Swinburne, classes are continuing as scheduled.
§ However, the university is preparing to transition to remote delivery in case face- to-face classes, labs and tutorials need to be suspended.
§ Anyone who is unwell is asked to stay home.
§ Staff and students are asked to familiarize themselves with recommended public health measures.
UPDATES ON CORONAVIRUS
§ Stay at home if you are unwell and if you have any concerns about your health, contact your medical practitioner.
§ Wash your hands regularly and cough into your elbow or a disposable tissue.
§ Support each other to practice social distancing: § Aim to stay 1.5 metres from other people. § Do not shake hands. § Avoid gatherings in enclosed spaces.
§ These are extraordinary and challenging times. Let’s support each user.
KEY RECOMMENDED PUBLIC HEALTH MEASURES
THIS WEEK: CAREERS AND EMPLOYABILITY EVENTS AROUND CAMPUS
Mon 16/03 Check out swin.nu/ask; swin.nu/careerpulse; swin.nu/careerstart; swin.nu/experts; swin.nu/careerhelp; swin.nu/aach
Tues 17/03 On Campus: ALL STUDENTS: Ask an Employer – BA302 12.30-1.30pm:– Robert Bosch and students talk about the professional placement program – GS Level 2 Rm 209: 10.15 -11am EY (Ernst & Young) Writing Resumes Webinar: Resumes & Cover letters 2.30 – 3.30pm
Wed18/03 On Campus: ALL STUDENTS: Ask an employer: – GS Level 2 11.45-12.30pm VPSC – JCSC 1.30-4pm National Security Careers Event Portfolio development: Writing STAR – EN 406 12.30-1.30
Thurs 19/03 On Campus: ALL STUDENTS: Ask an employer: – TD121 10.30-11.30pm: – NAB and students talk about the
professional placement program – GS Level 2 11.45-12.30: DXC (INF students)
Coming up in Weeks 3 & 4 Placement Information sessions with employers and past students
Mid & Final degree students Do this week: • Submit your resume to
Career Start • Register for a placement
(swin.nu/pp); Internship (Swin.nu/intern)
Get your resume ready now: Week 5 – Placements positions for S2 2020 open Week 8 – Internship positions for Winter & S2 2020 open
Find out & register at https://www.swinburne.edu.au/events// and SWINEMPLOY
16 March – 20 March
IS YOUR SEMESTER GOING THE WAY YOU EXPECTED? NOW’S THE TIME TO REFLECT
• What are you struggling to understand right now?
• How you can get the most out of your studies?
WE ARE HERE TO SUPPORT YOU
swi.nu/kfg4m
31 MAR
CENSUS DATE
TIME TO MAKE DECISIONS
Academic Development Advisors (FBL)
ADA_FBL@swin.edu.au
9214 8408
FOUR KEY PILLARS OF SUCCESS ON CAMPUS
(SEE CANVAS)
Copyright: Porter (2008)
LAST WEEK: ENVIRONMENT AL ANALYSIS – OVERLAP AND INTEGRATION
Copyright: www.spotlightgrowth.com
THE TRANS- PORTATION SECTOR
“STRATEGY’ IN THE NEWS – LAST WEEK
https://iview.abc.net.au/show/business
“STRATEGY’ IN THE NEWS – THIS WEEK
www.iata.org/pressroom/pr/Pages/2019-06-02-01.aspx
“… Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. …”
Porter (2008, p78)
BUT, WHAT INFLUENCES COMPETITION INSIDE THE INDUSTRY? PORTER’S FIVE FORCES MODEL OF INDUSTRY COMPETITION
§ Perfect Competition § Monopolistic Competition § Oligopoly § Monopoly
SO, WHAT USUALLY HAPPENS? FOUR MARKET STRUCTURES
§ Threat of new entrants: barriers to entry
§ Bargaining power of suppliers § Bargaining power of buyers § Threat of substitute products § Rivalry among competing firms
INDUSTRY ENVIRONMENT ANALYSIS: THE 5-FORCES COMPETITION MODEL
Porter (2008, p78)
1 THREAT OF NEW ENTRANTS: BARRIERS TO ENTRY
§ High entry barriers tend to increase the returns for existing firms in a industry and may allow some firms to dominate the industry
§ Industry incumbents want to maintain high entry barriers in order to discourage potential competitors from entering the industry
§ Economies of scale § Product differentiation § Switching costs § Access to distribution channels § Cost disadvantages independent of scale § Government policy
THE EXPERIENCE CURVE & ECONOMIES OF SCALE: REDUCING THE COSTS PER UNIT
Porter (2008, p78)
2 BARGAINING POWER OF SUPPLIERS
§ Supplier power increases when: § Suppliers are large and few in number § Suitable substitute products are not available
§ Suppliers’ goods are critical to buyers’ marketplace success.
§ Supplier power increases when: § Suppliers’ products create high switching costs § Suppliers have substantial resources and provide a
highly differentiated product § Suppliers pose a credible threat to integrate forward
into the buyers’ industry.
Porter (2008, p78)
3 BARGAINING POWER OF BUYERS
§ Buyer power increases when: § Buyers purchase a large portion of an industry’s total
output
§ Buyers’ purchases are a significant portion of a seller’s annual revenues
§ Switching costs (to other industry products) are low.
§ Buyer power increases when: § The industry’s products are undifferentiated or
standardised § Buyers pose a credible threat to integrate backward
into the sellers’ industry.
Porter (2008, p78)
4 THREAT OF SUBSTITUTE PRODUCTS
§ Function of a substitute § Goods or services outside a given industry perform
the same or similar functions at a competitive price (e.g. plastic has replaced steel in many applications).
§ Differentiated industry products that are valued by customers reduce this threat.
Porter (2008, p78)
5 RIVALRY AMONG COMPETING FIRMS
§ Competitors are rarely homogeneous; they differ in resources and capabilities and seek to differentiate themselves from competitors.
§ Firms seek to differentiate their products in ways that customers value and in ways the firms have a competitive advantage.
§ Common rivalry dimensions include: § Price § Service after the sale § Innovation
§ Industry rivalry intensifies with: § Numerous or equally balanced competitors § Slow industry growth § High fixed costs or high storage costs § Lack of differentiation opportunities or low switching costs § High strategic stakes § High exit barriers
“… Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. …”
Porter (2008, p78), Johnson, Whittington & Scholes (2011)
BUT, WHAT INFLUENCES COMPETITION INSIDE THE INDUSTRY? PORTER’S FIVE FORCES MODEL OF INDUSTRY COMPETITION
STRATEGIC GROUPS
§ Strategic groups are organisations within an industry or sector with similar strategic characteristics, following similar strategies or competing on similar bases.
§ These characteristics are different from those in other strategic groups in the same industry or sector.
§ An industry is a group of firms producing products and services that are essentially the same (e.g. automobile industry, airline industry).
§ A market is a group of customers for specific products or services that are essentially the same (e.g. the market for luxury cars in Germany … Luxury = horizontal segment; SUVs = vertical segment).
§ A sector is a broad industry group (or a group of markets) especially in the public sector (e.g. the health sector)
§ Greater competition within a strategic group than between strategic groups
§ Similar products § Similar market positions § Similar strategic actions
§ Strategic groups can be mapped on to two dimensional charts – maps. These can be useful tools of analysis.
Johnson, Whittington & Scholes (2011)
CHARACTERIST ICS FOR IDENTIFYING STRATEGIC GROUPS
TWO-DIMENSIONAL MAPPING OF STRATEGIC GROUPS (INDIAN PHARMACEUTICALS, WATCH-MAKING, EUROPEAN LOW-COST AIRLINES)
USES OF STRATEGIC GROUP ANALYSIS
§ Understanding competition – enables focus on direct competitors within a strategic group, rather than the whole industry.
§ Analysis of strategic opportunities – helps identify attractive ‘strategic spaces’ within an industry.
§ Analysis of ‘mobility barriers’ i.e. obstacles to movement from one strategic group to another. These barriers can be overcome to enter more attractive groups. Barriers can be built to defend an attractive position in a strategic group.
§ Helping to clarify… § ‘strategic customer’: the person(s) at whom the strategy is
primarily addressed because they have the most influence over which goods or services are purchased (e.g. for a pharmaceutical manufacturer, usually, it is the health authorities and hospitals not the final patient)
§ ‘critical success factors’: those factors that are either particularly valued by customers or which provide a significant advantage in terms of cost. Critical success factors are likely to be an important source of competitive advantage if an organisation has them
§ Problem/opportunity: groupings are not stable as there are pathways/trajectories within or across
§ Lets change our perspective and we can apply the idea of ‘grouping the similar, but distinct’ by focusing on organisations (to get Strategic Groups) or focusing on Products (Segments)
§ Each of these products, organisations and strategic groups can compete in the same “space” as each other or in differing segments…. And each of those various sub-sections of the industry may vary in terms of how well “developed”, or ‘aged’ that product segment is.
§ This metaphor of life stages that people go through as they age has also been applied to businesses and their products – most famously by the application of the idea of a Product Life Cycle
Moon (2005)
BREAK FREE FROM THE PRODUCT LIFE CYCLE
InventionèInnovation
THE DYNAMICS OF COMPETITIVE RIVALRY: KEY ISSUES FOR COMPETITION OVER THE LIFE CYCLE
THE DYNAMICS OF COMPETITIVE RIVALRY: MONEY FLOWS PER LIFECYCLE STAGE
Levitt (1965)
BUT REMEMBER – BEND THE MODEL: “THERE IS NO SPOON”…. USE STRATEGIC THINKING
AND JUST AS WE CAN WARP THE IDEA OF LIFE CYCLES, WHAT IF WE RE-EXAMINE SEGMENTS & PRODUCTS IN TERMS OF VALUE?
§ Value: A product’s performance characteristics and attributes for which customers are willing to pay
§ Analysing “value” is also a flexible tool
§ So, remember your perspective when analysing value
§ For example, value chain analysis can be used either across an industry or within an organisation
§ What and where is the value? § Three external points of reference
can get us started: § (1) the customer § (2) competitor-centred comparisons § (3) vertical relationships within the industry
VERTICALLY RELATED VALUE CHAINS: A STEREOTYPICA L INDUSTRY
Suppliers/ Components
Wholesale Distribution
Retailers
Consumers
Manufacturer
A PRODUCT VALUE CHAIN
Mining
Sorting & Grading
Sale of rough diamonds (sights)
Cutting and polishing
Jewellery Manufacture
Jewellery Sales
Customers
VERTICALLY RELATED VALUE CHAINS: REMEMBER TO KEEP TRACK OF WHERE YOU ARE ANALYSING
Suppliers/ Components
Wholesale Distribution
Retailers
Consumers
Manufacturer
Power of Suppliers
Power of Customers
Threat of New Entrants
Threat of Substitutes
Rivalry Among Existing
Competitors
Power of Suppliers
Power of Customers
Threat of New Entrants
Threat of Substitutes
Rivalry Among Existing
Competitors
VALUE CHAIN OF AIRLINE ‘SPACE’
Supplier Airline Channels Customers
Fleet Fuel Catering Staff Maintenance Services
Aggregate to provide transportation service
Freight Forwarders Airlines Travel agency Tour packages
Business customers
Individuals
USING VALUE CHAIN ANALYSIS
§ Analyse the value contributed at different stages in (a) the Industry, (b) the product’s value chain
§ Integrate the messages from these analyses into your strategic thinking
§ Where could your organisation add value that’s not being added (or ‘denied’), and/or where customers want value, and/or…
§ (Later, when we analyse inside the organisation, we’ll look at which activities contribute value Although some activities are necessary and/or strategic/part of a capability needed for our competitive advantage)
“A MAN IS WHAT HE THINKS ABOUT ALL DAY LONG.”
(RALPH WALDO EMERSON)
Copyright: Johnson, Scholes & Whittington (2011)
POTENTIAL BENEFITS AND DANGERS OF STRATEGIC PLANNING
