Strategic Management Session 3 PDF

Strategic Management Session 3 Where to Play The Strategic Tools for the External Analysis FHRMBA August 28th, 2023 dr. Boris Blumberg What strategic analysis tools do you know? And how do they help you to answer the question: Where to play? P E S T (E L) analysis Which trends should you observ...

Strategic Management Session 3 Where to Play The Strategic Tools for the External Analysis FHRMBA August 28th, 2023 dr. Boris Blumberg What strategic analysis tools do you know? And how do they help you to answer the question: Where to play? P E S T (E L) analysis Which trends should you observe  Political Environment  Economic Environment  Social Environment  Technological Environment  Ecological Environment  Legal Environment Global Trends 2040 Scenarios for the World in 2040 by the CIA Demographic Environment s Global Fragmentation Challenges Adaptation Disequilibrium Technology Economics Five Scenrario for 2040 Renaissance of A world adrift Competitive Co-existence Democracies Open systems foster Directionless world with US – China competition innovation and economic eroding international based on mutually growth institutions accepted rules Domestic needs are met Increased chance of Economic and challenges are armed conflcits interdependence lowers addressed Regional power and risks for armed conflict Institutions are restored corporates influence Influencing operations, US leadership for space, cybernet but do corporate espinoge and multilateral collaboration not dominate cyber attacks Authorative states slow Climate change not Balance between down innovation addressed geopolitical competition China leads the and economic co- developing world operation Climate change unanswereed Five Scenrario for 2040 Separate Silos Tragedy and Mobilization Economic down-turn, efficiency Global challenges create bottom- losses but less disruptions up social movements Large resourceful countries with Geopolitical hierarchy is few neighbors have an advantage reshuffled through unlikely Nationalism increases alliances (China – Europe) Technology progress slows down Fossil resource rich countries have Lacking international co- difficulties to adapt operations fails to address climate Multilateral organizations and change NGO have increased influence to Rival block try to secure scarce establish standards hold violators resources, more regional conflicts accountable Oil Bonanza Mexico: Flash in the pan UAE: Reducing the Dependency Mitigated by diversified economy Two further examples Norway: Souveraign State Fund Venezuela: Break Out Group What are scenarios for Suriname 2034 in the light of the oil bonanza? (1) How will / should Suriname use it‘s windfall gains? (2) What are the effects of the green energy transition? Further Books on Looking into the Future Tea Break How well does the average firm perform? The strategic yard stick Power Curve of Economic Profit 12 Average Firm 9.9% Net operating profit $ 921 M -146 296 10000 10 8.0% Return on Capital (%) Economic Profit $ 180 M Economic Profit (million $) 8 5000 6 0 4 Capital Charge $ 741 M S e r 2 -5000 i e s 0 9,262 1 Series1 -10000 Invested Capital (million $) Invested Capital (million $) Industry Power Curve 3000 2000 Economic Profit ($ million) 1000 0 l ies a ls ine ies as Rai es in g m as al s od e ry nt s di a ile ces ace et m co r e ar e it lit r i r lit G lin n tio G ic o n e e b i r n c o c a at e M a ti & & Ai r M i c m F hi on M m o rv sp te le ba rdw ft w U U il d ls tru e a c p o Se r o I n T e T o a o M O a a ns Ch m ut Ae H S it o n Ro et o M C o A o m e ss y M C o ec el og uc t l ir o l -1000 st r Au Te W hn n c Co Te Porter’s Five Force Model Customers Internal Potential Substitutes rivalry Entrants Suppliers Porter’s Five Force Model Profit = Σ sharei * margini Customers Internal rivalry Forward or backward integration to capture high margins; Outsourcing to eliminte low Suppliers margin activities What are the borders of your playing field? Customers Internal Potential Substitutes rivalry Entrants Suppliers Nightmare Competitor Consider all stakeholders, esp. the customer 360o Feedback How can we serve them? Balance external What is the market and what are the rules of the game? What are the core activities and what is the earning and internal modell? How combative is the market? Battle ground Nightmare comes from the outside. How do we create value? Innovation With whom could we achieve more? Break out Groups – Develop a nightmare competitor o Choose an organisation of one of the group members? o The chosen group member gives briefly an idea of their business model , their value proposition and their markets (playing fields) o Now address the following questions: o What would you do to kill that company? o What actions would you take if you are almost unrestricted? o What would you not do that the organisation is currenty doing; what would you do that the organisation is currently not doing? o What silly rules would you kil? o What the organisation‘s customers and employees say about the nightmare competitior o Do you use the insights gained in that exercise to improve the chosen organisation or to create the nightmare competitor. SWOT Internal Strengthes Weaknesses external Opportunities Threats Typical approach to conduct a SWOT analysis: SWOT: One way to avoid the internal bias Internal Strengthes Weaknesses external Opportunities Threats Internal Strengthes Weaknesses external Trends Evidence based SWOT Internal Strengthes Weaknesses o VRIO framework o VRIO framework o Value Chain Analysis o Value Chain Analysis o Market Position (BCG) o Market Position (BCG) o 5 Forces (Rivalry, Supplier, o 5 Forces (Rivalry, Supplier, Customer) Customer) external Trends o PESTEL o Market Growth (BCG) o 5 Forces (Substitutes, New entrants) Product Life Cycle