Strategic Management

Tools & Techniques

Tool 17th – Porter’s Five-Forces

INDUSTRY COMPETITIORS (Rivalry among existing firms)

POTENTIAL ENTRANTS

BUYERS

SUBSTITUTES

SUPPLIER

Threats of new

entrants

Bargaining

power of

SuppliersThreats of substitutes

products or services

Bargaining power of

Buyers

Tool 17th – Porter’s Five-Forces

Example:

Five Forces Analysis of Contact Center Outsourcing Market in the Asia Pacific Region

Market Overview:

The Contact Center Outsourcing market in the APAC region has three forms of business:

outsourcing from Western countries,

outsourcing from foreign MNCs in the APAC region

domestic outsourcing

Tool 17th – Porter’s Five-Forces

Contact Center Outsourcing Market for Asia Pacific:

1. Threat of Rivalry (High) – Competition among the existing players is high because of cost pressure among vendors. Hence, the threat of rivalry is high

2. Bargaining Power of Supplier (Low) – The presence of many service providers and low switching costs result in low bargaining power of suppliers

3. Bargaining Power of Buyers (Moderate) – Though there are a number of vendors present in the market, clients prefer to use services from reputable service providers.

Tool 17th – Porter’s Five-Forces

4. Threats of New Entrants (High) – The probability of new players entering the market is high because of the relatively low-entry barrier in the APAC region and the moderate cost structure requirement of the business

5. Threat of Substitutes (Low) – There is no direct substitute for contact center outsourcing. The only alternative possible is for companies to move these functions in-house

Tool 18th - Strategy Clock (1 of 5)

An expansion of Porter’s Generic Strategies, developed by Cliff Bowman and David Faulkner.

• Eight possible strategies or positions

A diagrammatic representation of the relationship between perceived value to the customer and price.

Tool to identify a company’s –

• Competitive position

• Strategy in convincing its customers to buy its product versus competitors.

Tool 18th - Strategy Clock (2 of 5)

Tool 18th - Strategy Clock (3 of 5)

Strategy 1 – Low Price/Low Added Value (No Frills)

Inferior offerings but with very attractive price

Focused on a price-sensitive market segment

Must be volume driven to compensate low price

Air Asia

Strategy 2 – Low Price

Similar offerings to competitors while keeping price low

Key driver is to reduce cost which others cannot imitate

Volume driven

Dell

Strategy 3 – Hybrid

Differentiated offerings but with low price

A combination that builds customer loyalty

IKEA

Tool 18th - Strategy Clock (4 of 5)

Strategy 4 – Differentiation

Differentiated offerings and similar price range with competition

Branding is key to maintain value perception

Apple

Strategy 5 – Focused Differentiation

Differentiated premium offerings with higher price range against competitors

Niche market with high margins

Value perception is crucial

Bentley

Strategy 6 – High Price/Standard Value

Similar offerings to competitors but with higher price

If competitors do not follow price, will lose market share

Can be a short term strategy, price could build value perception

Tool 18th - Strategy Clock (4 of 5)

Strategy 7 – High Price/Low Value

Inferior offerings at a high price

Only effective its there are no competitors in market, monopolistic

Strategy 8 – Standard Price/Low Value

Inferior offerings at a similar price to competitors.

Will lose market share

Tool 19th – Fish Bone Ishikawa

Known as Cause and Effect Analysis

Devised by Professor Kaoru Ishikawa

When to use this tool:-

Discover the root cause of a problem.

Uncover bottlenecks in your processes.

Identify where and why a process isn't working.

Brainstorm The Major Categories Of Causes Of The Problem.

If This Is Difficult Use Generic Heading

HOW TO DO????

Identify the Problem

Work Out the Major Factors Involved

Identify Possible Causes

Analyze Your Diagram

EXAMPLE

Tool 20th – Pareto’s Principle

Named after Italian economist - Vilfredo Pareto

The law of the vital few, and the principle of factor sparsity

Specifies an unequal relationship between inputs and outputs

Most things in life are not distributed evenly

Roughly 80% of the effects from 20% of the causes

Total need not add up to 100

Ideal vs 80/20 Rule

Ideally, effort should rise together with Result

80/20 rule shows the actual result

PROCEDURES FOR PARETO RULE

Identify the issues and root causes from Fishbone Ishikawa strategy

Identify the frequency of the issues

Assign the weightage on the identified issues

Perform the calculations and accumulations

Draft the graph with most critical issues from the left

Identify the 80-20 points from the graph

Solve the 20% which resolves 80% issues

IDENTIFIED ISSUES FOR AIRLINES

Absent Rate and Impacts of Pilots (5 times)

Absent Rate and Impacts of Stewards (200 times)

Absent Rate and Impacts of Groundmen (100 times)

Absent Rate and Impacts of Technicians (100 times)

* Rate is known as the frequency whereas impact is the weightage of the impacts towards airlines schedules.

ISSUES CALCULATIONS

Frequency Weight (%) Freq * Weight Percentage % Accumulation

Technicians 120 20 24 0.42 42

Stewards 200 10 20 0.35 77

Groundmen 100 10 10 0.18 95

Pilot 5 60 3 0.05 100

100% 57

Frequency Weight (%) Total

Pilots 5 60 3

Stewards 200 30 20

Groundmen 120 20 24

Technicians 100 10 10

GRAPH FROM CALCULATIONS

Percentage

100

90

80

70

60

50

40

30

20

10

0

Technicians Stewards Groundmen Pilots Job Functions

QUESTIONS?

THANK YOU