Business Growthand Strategy

Strategic management strategic and day-to-day management the components of strategic management

strategic analysisstrategic choicestrategic implementation

Importance of the business environment PEST analysis

Strategic Analysis

Strategic Analysis

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

Industry competitors

Porter's Five Forces Model

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

Industry competitors

Rivalry amongexisting firms

Porter's Five Forces Model

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

Potentialentrants

Industry competitors

Rivalry amongexisting firms

Threat ofnew entrants

Porter's Five Forces Model

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

Substituteproducts

Potentialentrants

Industry competitors

Rivalry amongexisting firms

Threat ofnew entrants

Threat ofsubstitutes

Porter's Five Forces Model

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

Suppliers

Substituteproducts

Potentialentrants

Industry competitors

Rivalry amongexisting firms

Threat ofnew entrants

Bargaining powerof suppliers

Threat ofsubstitutes

Porter's Five Forces Model

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

BuyersSuppliers

Substituteproducts

Potentialentrants

Industry competitors

Rivalry amongexisting firms

Threat ofnew entrants

Bargaining powerof suppliers

Bargaining powerof buyers

Threat ofsubstitutes

Porter's Five Forces Model

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

Strategic Analysis

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

factors affecting each of the forces

Strategic Analysis

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

factors affecting each of the forces limitations of the five forces model

Strategic Analysis

Value chain analysis nature of value chain analysis primary activities

inbound logisticsoperationsoutbound logisticsmarketing and salesservice

secondary activitiesprocurement technological developmenthuman resources management firm infrastructure

Inboundlogistics

The value chain

Operations

Outboundlogistics

Marketingand sales

After-salesservice

Firm

infra

stru

ctur

eTechnological

developmentHu

man

reso

urce

man

agem

ent

Procurement

Strategic Choice

Environment or market-based strategy types

cost leadershipdifferentiation 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

Growth by internal expansion product differentiation vertical integration diversification

Growth by external expansion: mergers and takeovers horizontal mergers vertical mergers conglomerate mergers

Growth Strategy

Alternative growth strategy

GROWTH OF A FIRM

Internal expansion External expansion

(1) DifferentiationHorizontal expansion

(same product, increasein market share)

(1) Horizontal integrationMergers of firms

producing the sameproduct

(2) Vertical integrationDifferent products, butbelonging to different

stages of same product

(2) Vertical integrationMergers of firms producing at different stages of same

process

(3) ConglomerateDiversification -

introduction of totally different products

(3) ConglomerateDiversification - merger of

firms producing totally unrelated products

Growth Strategy

Growth by internal expansion

financing internal growth

borrowing

share issue

ploughing-back profit

the takeover constraint

Growth Strategy

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

backward integration ('upstream' integration) forward integration ('downstream' integration)

why vertically integrate? economies of scale reduced uncertaintymonopoly power

• barriers to entry growth through diversification

advantages• when existing market is saturated• spreads risks

Growth Strategy

Growth through mergers and takeovers types of merger and takeover

horizontalverticalconglomerate

motives for mergers and takeoversgrowtheconomies of scalemonopoly power increased market valuation reduced uncertaintyother motives

effects of mergers on consumers

Financing 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

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

disadvantagescost of getting listedpossible short-termism and instability

Financing Growth and Investment

Is the stock market efficient? the efficient market hypothesis

share prices reflect information about companies' current and expected future performance

implications of stock market efficiencybenefit of speculation diminishes as efficiency

increases

perfect efficiency and share prices following a 'random walk'

Financing Growth and Investment

Staying Small

EU definition of SMEs by number of employees

micro enterprises

small enterprises

medium enterprises

by turnover

EU SME definitions

EU SME definitions

EU SME definitions

EU SME definitions

Staying Small

Competitive advantage and small firms flexibility quality of service production efficiency and low overheads product development and innovation

Problems facing small businesses selling and marketing funding R&D management skills less ability to gain economies of scale