Week 6 & 7 Business Frameworks.pptx

Entrepreneurship & Business Modeling Lecturer: Raul S. Castro Lopez (Mr. Castro) [email protected] Business Framework Terminology Business Frameworks: • Business frameworks are useful tools that can help you analyze business issues, structure your thinking and communicate recommendations....

Entrepreneurship & Business Modeling Lecturer: Raul S. Castro Lopez (Mr. Castro) [email protected] Business Framework Terminology Business Frameworks: • Business frameworks are useful tools that can help you analyze business issues, structure your thinking and communicate recommendations. • Take a broader conceptual framework and scale it to fit your needs. • A business framework also gives you a starting place and a common vocabulary that you can edit to fit your 3 own purpose. INTERNAL Strategic Planning • Strategic planning: Is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing business / marketing opportunities. • Purpose: To find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. 4 INTERNAL Companywide Strategic Planning: Steps in the Strategic Planning Process 5 INTERNAL Eg. Business Frameworks: Business-level Frameworks • Ansoff Matrix Industry-level • Value Chain Analysis Frameworks • Business Model Canvas • Porter’s Five Forces • SWOT / TOWS Analysis • Industry Life Cycle • VRIO Framework • Value Net Model • Bartlett and Ghoshal’s Matrix Macro-level Frameworks • OLI Paradigm • Hofstede’s Cultural Dimensions • Porter’s Generic • Porter’s Diamond of National Strategies Advantage • Profit Tree • PESTEL Analysis • Value Management-Level Disciplines Product-level Frameworks • Blake and Mouton’s Managerial Grid • Marketing Funnel • Fiedler’s Contingency Model of Leader-Situation • Price Elasticity Matches • Product/Technology Adoption Curve Life Cycle • Hersey and Blanchard’s Leadership Styles • Product Life Cycle • Kotter’s 8 Steps of Change (Management) Model • AIDA Model • Lewin’s 3 Step Model of Change (Management) • Marketing Funnel Corporate-level Frameworks • BCG Growth-Share Matrix • GE/McKinsey Matrix • Cultural WEB • Strategy Diamond • Acquisition Integration Approaches • A.T. Kearney Strategy Chessboard • McKinsey 7S Model Eg. Business Frameworks: Business-level Frameworks • Ansoff Matrix Industry-level • Value Chain Analysis Frameworks • Business Model Canvas • Porter’s Five Forces • SWOT / TOWS Analysis • Industry Life Cycle • VRIO Framework • Value Net Model • Bartlett and Ghoshal’s Matrix Macro-level Frameworks • OLI Paradigm • Hofstede’s Cultural Dimensions • Porter’s Generic • Porter’s Diamond of National Strategies Advantage • Profit Tree • PESTEL Analysis • Value Management-Level Disciplines Product-level Frameworks • Blake and Mouton’s Managerial Grid • Marketing Funnel • Fiedler’s Contingency Model of Leader-Situation • Price Elasticity Matches • Product/Technology Adoption Curve Life Cycle • Hersey and Blanchard’s Leadership Styles • Product Life Cycle • Kotter’s 8 Steps of Change (Management) Model • AIDA Model • Lewin’s 3 Step Model of Change (Management) • Marketing Funnel Corporate-level Frameworks • BCG Growth-Share Matrix • GE/McKinsey Matrix • Cultural WEB • Strategy Diamond • Acquisition Integration Approaches • A.T. Kearney Strategy Chessboard • McKinsey 7S Model 8 INTERNAL Culture Web: 9 INTERNAL The Business Internal Environment Strategic Management is concerned with two types of audit: ●Internal ●External Successful strategies are dependent on the organisation having the internal strategic capability required for survival and success. This capability can become embedded in the culture of the organisation. 10 INTERNAL THEREFORE… What is the first thing that pops in your mind when you hear the term corporate culture? 11 INTERNAL What is Organisational Culture? Culture refers to the typical way of working within an organisation as demonstrated by the behaviours of the people that work for it. “… it reflects the underlying assumptions about the way work is performed; what is acceptable and not acceptable’; and what behaviour and actions are encouraged and discouraged”. (Atkinson cited in Mullins, 2013) https://www.youtube.com/watch?v=cGEb-q5JMU0 12 INTERNAL Culture exists at Three Levels: Level 1: Artefacts – the physical environment. https://www.youtube.com/watch?v=CspdvSNe_Y4 Level 2: Values – a person’s sense of what ought to be. Level 3: Basic underlying assumptions – those so taken for granted that behaviour based on any other assumptions would be inconceivable. Schein (1985) 13 INTERNAL Culture fulfills several important functions: • Conveys a sense of identity for employees • Helps generate employee commitment to something greater than themselves. • Adds to the stability of the organisation as a social system. • Serves as a frame of reference for employees to use to make sense out of organisational activities and to use as a guide for appropriate behaviour. http://www.youtube.com/watch?v=a4JdQi60an0 Wheelan and Hunger (1998) 14 INTERNAL Analysing the main elements of Organisational Culture • • • • Environment People Corporate cultures Labour policies International issues and culture Cultural factors specific to organisation • History and ownership • Size • Technology • Leadership and mission • Cultural Web Identifying the basic culture of the organisation • • • • Power Role Task Person Note that different groups within the organisation may have different subcultures Analysis of the strategic implications • Prescriptive or emergent • Competitive advantage • Strategic change 15 INTERNAL The Cultural Web The Cultural Web, developed by Gerry Johnson and Kevan Scholes in 1992, provides one such approach for looking at and changing your organization's culture. Consists of the factors that can be used to characterise aspects of organisational culture. Can be used to: • Identify and describe an organisational culture • Identify and describe a desired culture. • Identify blockages to change. • Can identify changes that need to occur in order to deliver a new strategy. 16 INTERNAL The Cultural Web 17 INTERNAL The Paradigm The set of assumptions held relatively in common and taken for granted in an organisation. Interrelated elements equivalent to the pattern of the work environment, or the values of the organization. • Relates to Schein’s “Level 3” • Represents a collective experience. • It links the other 6 elements but may also tend to preserve them. • It summarises the culture of the organisation. 18 INTERNAL The Cultural Web: some useful questions 19 INTERNAL Elements of the Cultural Web Rituals & Routines: Routines indicate what is expected of employees on a day-to-day basis, and what has been either directly or indirectly approved by those in managerial positions. • Particular activities through which the organisation emphasises what is especially important. ●Eg: Training events, appraisals, sales conferences. • Procedures and the “normal” way of doing things. ●Eg: How employees behave towards each other and customers. 20 INTERNAL Elements of the Cultural Web Stories: Discussed by individuals within and outside the company • What people in the organisation talk about. • Embed the present in its organisational history. • Usually concern successes, disasters, heroes, villains and mavericks. • What form of company reputation is communicated between customers and stakeholders? • ·What stories do people tell new employees about the company? • ·What do people know about the history of the organisation? • ·What do these stories say about the culture of the business? 21 INTERNAL Elements of the Cultural Web Symbols: The visual representation of the company; how they appear to both employees and individuals on the outside. • May only exist at “level 1”. Reveal underlying attitudes towards employees, customers etc. • What kind of image is associated with the company from the outside? • How do employees and managers view the organisation? • Are there any company-specific designs or jargon used? • How does the organisation advertise itself? • Examples would include logos, office design and size, company car, job titles and language. 22 INTERNAL Elements of the Cultural Web Power structures: • Concerned with who makes decisions and how, the genuine power structures and responsible individuals within the organisation. • It may refer to a few executives, the CEO, board members, or an entire managerial division. • Very much linked to the organisational ownership and structure. • Who holds the power within the organisation? • Who makes decisions on behalf of the company? • What are the beliefs and culture of those as the top of the business? • How is power used within the organisation? 23 INTERNAL Elements of the Cultural Web Control systems: Systems and pathways by which the organisation is controlled. • Financial management, individual performance-based rewards (both measurement and distribution) and quality-control structures. • Measurements and reward systems that monitor and emphasise what is important in the organisation. • Are important for influencing behaviour. • Could be formal or informal, well documented or haphazard. • Which processes are strongly and weakly controlled? • 24 In general, is the company loosely or tightly controlled? INTERNAL Elements of the Cultural Web Organisational structure: Refers to both the hierarchy and structure designated by the organisation. • Represents the system of power distribution within the organisation. • Identifies the nature of communication and delineates important relationships. • Types of structure include hierarchical or flat, pyramid, matrix etc. • How hierarchical is the organisation? • Is responsibility and influence distributed in a formal or informal way? • Where are the official lines of authority? • Are there any unofficial lines of authority? 25 INTERNAL Marks & Spencer Cultural Web Paradigm: We are the best; we set the standards; we know best; we occupy the middle ground; we are synonymous with high quality; people respect us and will always shop here. Power: very top-heavy with deference to top management; male dominated Organisation: mechanistic, bureaucratic; top-down; hierarchical Control: top-down control in detail both of the stores and of suppliers; insistence on Conformity 26 INTERNAL Marks & Spencer Cultural Web Cont. Rituals & Routines: Deference; knowing your place; store layout; family atmosphere Stories: History and legacy; Simon Marks; power over suppliers; authoritarian behaviour of top management; staff welfare benefits. Symbols: The St Michael brand; Simon Marks and CEOs as father figures; identical store appearance. 27 INTERNAL Cultural Web to Change • As above, the first step of changing the culture of the organisation is to analyse elements of the Cultural Web as they are in the present. • The next step is to repeat the process, examining each element, but this time considering what one would like the culture, beliefs and systems to be. 28 INTERNAL http://www.loreal.com/group/who-we-are/our-values-and-ethical-principles http://ritzcarltonleadershipcenter.com/2015/04/organizational-culture-is-lived-every-day / 10 Examples of Companies With Fantastic Cultures (entrepreneur.com) 29 INTERNAL Ansoff Matrix: Strategic Hotel Management: 31 1. What is the Ansoff matrix and its importance. 2. • Market Penetration • Market • Product development • Diversification development 3. The 3 steps to use the different strategic options. INTERNAL Intro to Ansoff Matrix  The matrix is used as a marketing plan that helps a business determine its products and market strategy. 32 INTERNAL Theoretical strategies - Ansoff’s Alternatives •Withdrawal •Demerger •Privatisation 33 INTERNAL Strategic Hotel Management: Importance of the tool • The Ansoff Matrix is a strategic framework designed for organizations who want to move beyond 'business as usual’. • It's designed to help you figure out which of four strategic directions you should take to successfully grow your business. 34 INTERNAL Strategic Hotel Management: 2. The 4 different growth strategies: Market Penetration Market Development Product Development Diversification 35 INTERNAL 1) Market Penetration: Businesses use this strategy when they aim to sell existing products into existing markets. It focuses on switching from occasional customers to regular customers and from regular customers to intensive product users. 36 INTERNAL 2) Market Development: The business seeks to expand its existing products into new markets.  This strategy is about reaching new customer segments or expanding internationally by targeting new geographic areas. 37 INTERNAL 3) Product Development This is the strategy where the business aims to introduce new products into existing markets. It seeks to sell other products to regular customers often by intensifying existing communication channels. 38 INTERNAL 4) Diversification: Diversification is the name given to the growth strategy where a business enters a new market with new products This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience. Operating in businesses varying from computers, phones and refrigerators to chemicals, insurances and hotel chains 39 INTERNAL Strategic Hotel Management: 2. There are two types of diversification: 40 INTERNAL The 3 Steps to use the different strategic options 41 INTERNAL Alternative market based strategies Withdrawal: Withdrawing from one market and moving into another. Appropriate if: ●Product life cycle is in decline. ●If product range has been over-extended. ●If it is necessary to raise funds for elsewhere. 42 INTERNAL Alternative market based strategies Demerger: • Allows companies to realise underlying asset value. • Allows companies to focus on their own activities. • But this may destroy benefits of size. Privatisation: • Has been a general trend since 1980s • Note changes in management style, customer focus, product range etc. STEEL INDUSTRY 43 INTERNAL Theoretical Strategies - Porter’s Alternatives Cost Leadership Competitive Advantage Differentiation Cost Focus Differentiation Focus 44 INTERNAL Porter Explained Cost Leadership • “The low cost producer in its industry…” • An organisation must have the lowest cost base such that competitors cannot hope to emulate it – this is difficult & requires continual attention to finding new ways to reduce costs. • Examples of companies using this strategy include: EasyJet, McDonalds, Unilever ice cream. 45 INTERNAL How can this be achieved? • Having a substantial market share which delivers economies of scale. • Through experience curve effects which allows firms to develop a core competency in cost reduction. • Typically sell a no frills product and shave costs off every element of the value chain. 46 INTERNAL Differentiation • Seeks to provide products or services unique or different from those of competitors in terms of dimensions widely valued by buyers. • Achieved through a unique or improved product/service (Requires R&D, innovation etc) • Through marketing (often branding) • Through competency based approach (Eg. customer service) 47 INTERNAL Examples of organisations using differentiation. • BA – Customer service (and innovation) W Resorts?? • Intel – Technological competences. One&Only Resorts?? • Dyson – innovation. • McDonalds v’s Burger King • Coca Cola – brand image. 48 INTERNAL Focus strategy • Occurs when the organisation focuses on a specific niche in the market. • Used when it is not possible to gain competitive advantage through low cost or differentiation across the broad range of the market. • Achieving low cost leadership may require high initial funds. • May not be credible to offer high quality & cheap products under one brand. 49 INTERNAL Examples of companies using Focus • Four Seasons Hotel HK, • Budget Hotels • KFC 50 (Differentiation focus) (Cost Focus) ??? INTERNAL What is the difference? Corporate Level • Overall direction  general attitude towards growth and the management of the organization’s various business and product lines Business Level • Developing a firm specific model that will allow the firm to gain competitive advantage over its rivals  improving its competitive position 51 INTERNAL Corporate level • BCG Growth-Share Matrix • McKinsey 7S Model • Strategy Diamond • • • • • • • • Business level SWOT Analysis Ansoff Matrix Porter’s Generic Strategies Value Chain Analysis Business Model Canvas Internal Factor Evaluation Matrix External Factor Evaluation Matrix Space Matrix Main decisions Corporate Level: BCG Growth-Share Matrix 52 What to invest in? What to discontinue? Which products to develop further? INTERNAL Corporate Level: BCG Growth-Share Matrix Main target: deciding how to prioritize the different businesses • Structure: 4 quadrants  degree of profitability of each business • Executives classify their businesses + take decisions about where to concentrate the resources  create higher value and minimize costs • High market share: Higher productivity  economies of scale  higher profit • High growth: higher earnings + costs of investment  burning a lot of cash Read more: https://www.thepowermba.com/en/blog/bcg-matrix 53 INTERNAL Corporate Level: BCG Growth-Share Matrix Stars: high growth industry  cash generators & burners  target of investments Cash cows: the most profitable brands  to support them but not invest into their growth Question marks: consuming cash, generate losses but can become stars  require consideration! Dogs: not worth investing in  losses  might be sold, liquidated or repositioned 54 INTERNAL Corporate Level: BCG Growth-Share Matrix 55 INTERNAL THE VALUE CHAIN: 56 INTERNAL The Value Chain Analyze Corporate Controllable Variables • Value chain is the set of interlinked activities that add value to the final product or service. • Value chain analysis assesses where and to what extent value is added to the final product or service. 1.Who are the company’s target customers? 2.What value does the company want to deliver to these customers? 3.How will this customer value be created? https://www.youtube.com/watch?v=g8p2H7EvoGM 57 INTERNAL The Value Chain Source: Adapted from M. E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York, NY: Free Press, 1985. 58 INTERNAL The Value Chain • Value chain analysis focuses on the third question???. • The goal is to enable management to determine the set of activities that will comprise the company’s value chain, including which activities the company will do itself and which will be outsourced. • Management must consider where to locate various value chain activities and to examine linkages among the activities in the value chain. • Linkages must be examined across activities within the company and manage relationships with external entities (suppliers, distributors, or customers) within and across nations. 59 INTERNAL The Value Chain • The desired outcome is identification and establishment of a superior set of well-integrated value chain activities and linkages. • This system will permit the company to effectively and efficiently develop, produce, market, and sell the company’s products and services to the target customers and create the basis for global competitive advantage. 60 INTERNAL McKinsey Matrix: GE McKinsey Matrix • General Electric Matrix, Nine-box matrix) is just like the BCG Matrix a portfolio analysis tool. • Analyse strategic business units or product lines based on two variables: Industry Attractiveness & Competitive Strength of a business unit. • Combining these two variables into a matrix, a corporation can plot their business units accordingly and determine where to invest, where to hold their position, and where to harvest or divest. 62 INTERNAL GE McKinsey Matrix: A strategic tool for portfolio planning A portfolio being a group of businesses that make up a company (SBUs) Example: Hilton Hotels has many SBUs, e.g. Double Tree, Waldorf Astoria. As no business has an infinite amount of money (Lack of resources). This Matrix help us to: • Which SBUs, should receive more money or les investment. • What new products or SBUs are needed in the portfolio • Which products or SBUs should be divested Developed in the 70s. 63 INTERNAL GE McKinsey Matrix: 64 INTERNAL Market Competitiveness & Competitive Strength Most of these factors are subjective! • Market Attractiveness Factors: Demonstrated by how beneficial it is for a company to enter and compete within a certain industry based on the profit potential of that specific industry. • The most common factors to look at are: Market Segmentation & Size/ Industry Life Cycle/ Macro Environment PEST/ Expected market growth rate / Market profitability trend / Competition level or Industry structure Porter´s Five Forces. • Competitive Strength Factors: This variable measures how strong or competent a particular company is against its rivals: it is an indicator of its ability to compete within a certain industry. • The most common factors to look at are: Customer Loyalty/ Level of Differentiation/ Total market share / market share growth rate / brand strength / Efficiency and effectiveness of internal linkages (Value Chain). 65 INTERNAL References Ball, D., Geringer, M., and McNett, J. (2020). International Business: (2nd ed.). McGraw-Hill. Albot, F. & Bhattacharjee, S. (2018). Improve your global business english: The essential toolkit for writing and communicating across borders. Brilliance Audio Publishing. Retrieved from LIRN/SkillSoft [MP3/AUDIOBOOK/Books24x7 version]. Baker, A. (2003). Why is trade reform so popular in Latin America? A consumption-based theory of trade policy preferences. World Politics, 55(3), 423-455. http://dx.doi.org/10.1353/wp.2003.0014 Maneschi, A. (2009). Gains from trade. Princeton: Princeton University Press. Retrieved from ProQuest. https://www.youtube.com/watch?v=_YhEpBvlO2M https://www.youtube.com/watch?v=wnOj3hP4hlE https://www.youtube.com/watch?v=4Kekdb-xHqA https://www.youtube.com/watch?v=mR9eICQJLXA 66 Also see: the ‘live’ links throughout this PP INTERNAL Q&A 67 INTERNAL