bus growth

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6Business Growth

and Strategy

6Business Growth

and Strategy

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Strategic management

strategic and day-to-day management

the components of strategic management strategic analysis

strategic choice

strategic implementation

Importance of the business environment

PEST analysis

Strategic management

strategic and day-to-day management

the components of strategic management strategic analysis

strategic choice

strategic implementation

Importance of the business environment

PEST analysis

Strategic AnalysisStrategic Analysis

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Porter's five forces model

the five forces

the bargaining power of suppliers

the bargaining power of buyers

the threat of potential new entrants

the threat of substitutes

the extent of competitive rivalry


the five forces






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Industry competitors

Porter's Five Forces ModelPorter's Five Forces Model

Source: Michael E. PorterCompetitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)

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Rivalry among

existing firms



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Substitute

products

Potential

entrants


Rivalry among

existing firms

Threat of

new entrants

Threat of

substitutes



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Suppliers

Substitute

products

Potential

entrants


Rivalry among

existing firms

Threat of

new entrants

Bargaining powerof suppliers

Threat of

substitutes



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BuyersSuppliers

Substitute

products

Potential

entrants


Rivalry among

existing firms

Threat of

new entrants

Bargaining powerof suppliers

Bargaining powerof buyers

Threat of

substitutes



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the five forces






factors affecting each of the forces


the five forces






factors affecting each of the forces

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Value chain analysis nature of value chain analysis

primary activities inbound logistics

operations

outbound logistics

marketing and sales

service

secondary activities procurement

technological development

human resources management

firm infrastructure

Value chain analysis nature of value chain analysis

primary activities inbound logistics

operations

outbound logistics

marketing and sales

service

secondary activities procurement

technological development

human resources management

firm infrastructure

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Inbound

logistics

The value chainThe value chain

Operations

Outbound

logistics

Marketing

and sales

After-sales

service

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Strategic ChoiceStrategic Choice

Environment or market-based strategy

types

cost leadership

differentiation

focus

importance of establishing:-

the basis of a firm's competitive advantages

the nature of the target market Resource-based strategy

exploiting core competencies

defining & establishing core competencies

Environment or market-based strategy

types

cost leadership

differentiation

focus

importance of establishing:-

the basis of a firm's competitive advantages

the nature of the target market Resource-based strategy

exploiting core competencies

defining & establishing core competencies

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Growth by internal expansion

product differentiation

vertical integration

diversification

Growth by external expansion: mergersand takeovers

horizontal mergers

vertical mergers

conglomerate mergers


product differentiation

vertical integration

diversification

Growth by external expansion: mergersand takeovers

horizontal mergers

vertical mergers

conglomerate mergers

Growth StrategyGrowth Strategy

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Alternative growth strategyAlternative growth strategy

GROWTH OF A FIRM

Internal expansion External expansion

(1) Differentiation

Horizontal expansion

(same product, increasein market share)

(1) Horizontal integration

Mergers of firms

producing the sameproduct

(2) Vertical integration

Different products, but

belonging to different

stages of same product

(2) Vertical integration

Mergers of firms producing

at different stages of same

process

(3) Conglomerate

Diversification -

introduction of totally

different products

(3) Conglomerate

Diversification - merger of

firms producing totally

unrelated products

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financing internal growth

borrowing

share issue

ploughing-back profit

the takeover constraint


financing internal growth

borrowing

share issue

ploughing-back profit

the takeover constraint

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Growth by internal expansion (cont.) growth through vertical integration

backward integration ('upstream' integration)

forward integration ('downstream' integration)

why vertically integrate?

economies of scale

reduced uncertainty

monopoly power

barriers to entry

growth through diversification

advantages when existing market is saturated

spreads risks

Growth by internal expansion (cont.) growth through vertical integration

backward integration ('upstream' integration)

forward integration ('downstream' integration)

why vertically integrate?

economies of scale

reduced uncertainty

monopoly power

barriers to entry

growth through diversification

advantages when existing market is saturated

spreads risks

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Growth through mergers and takeovers types of merger and takeover

horizontal

vertical

conglomerate motives for mergers and takeovers

growth

economies of scale

monopoly power increased market valuation

reduced uncertainty

other motives

effects of mergers on consumers

Growth through mergers and takeovers types of merger and takeover

horizontal

vertical

conglomerate motives for mergers and takeovers

growth

economies of scale

monopoly power increased market valuation

reduced uncertainty

other motives

effects of mergers on consumers

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Financing Growth and InvestmentFinancing Growth and Investment

Sources of business finance

internal sources

ploughed-back profit

external sources

banks

mainly short- and medium-term finance

stock market

longer-term finance

problem of 'short-termism'

international sources

Sources of business finance

internal sources

ploughed-back profit

external sources

banks

mainly short- and medium-term finance

stock market

longer-term finance

problem of 'short-termism'

international sources

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The role of the Stock Exchange

primary market

secondary market

advantages brings together savers & firms seeking finance

regulates firms and helps encourage confidence

facilitates mergers and takeovers

reduces transaction costs of investment finance disadvantages

cost of getting listed

possible short-termism and instability

The role of the Stock Exchange

primary market

secondary market

advantages brings together savers & firms seeking finance

regulates firms and helps encourage confidence

facilitates mergers and takeovers

reduces transaction costs of investment finance disadvantages

cost of getting listed

possible short-termism and instability

Financing Growth and InvestmentFinancing Growth and Investment

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Staying SmallStaying Small

EU definition of SMEs

by number of employees

micro enterprises

small enterprises

medium enterprises

by turnover

EU definition of SMEs

by number of employees

micro enterprises

small enterprises

medium enterprises

by turnover

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Criterion Micro Small Medium

Maximum number of employees 9 49 249

Maximum annual turnover 7 million 40 million

Maximum annual balance sheet total 5 million 27 million

Maximum % owned by other largeenterprise(s) 25% 25%

EU SME definitionsEU SME definitions

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bus growth

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