150 Business Diagrams

150 Business Diagrams...
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Key Words...
Break-even – Financing Life Cycle – Economies of Scale –
Elasticity – Sales Cycles – Market Potential – Portfolio
Matrix – Product Model – Four P’s – Push/Pull Strategy –
Marketing Mix – PDCA Cycle – SWOT – Value Chain –
Ansoff Matrix – BCG Matrix – 7-S Model – Core
Competencies – GE Business Screen – Nine Cell Industry –
Risk/Reward Diagram – Porter’s Five Forces – Industry
Competition – Generic Strategies – Geobusiness Model –
Porter’s Diamond – Matrix Design – PIMS – Leavitt’s
Diamond – Belbin’s Team Roles – Theory X/Y – Maslow’s
Hierarchy – Herzberg’s Theory – Cultural Web – Pareto
Curve – CIM Concept – Value Drivers
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Markets and Structure of Flow
Resources Resources
Resource
Money markets Money
Taxes, Services,
goods money
Services, money Taxes

Manufacturer Government Consumer
markets Taxes, goods markets Services markets
Services, Taxes,
money goods
Money Money
Middlemen
Goods and services markets Goods and services

A Company‘s Macroenvironment
Le
MACROENVIRONMENT
gi
s la
y
tio
og
IMMEDIATE INDUSTRY &
n
ol
an
COMPETITVE ENVIRONMENT
hn
d
c
Te
re
gu
la
Suppliers Substitute
tio
ns
COMPANY
Rival Firms Buyers
ics
So
ph
ci
al
ra
og
V
New Entrants
al
m
ue
de
sa
n
nd
tio
la
Li
pu
fe
The Economy at large

st y
Po
le
s

Break-even Point
Value $
Sales
Profit
Break-even Point
Total
Variable costs
costs
Fixed
Current sales level costs
0
0 Units sold

Break-even Chart
1200
Total revenue
1000
Target profit
Total cost
800
600
400
) s dnas uoht ni ( sr all o D
Fixed cost
200
0 10 20 30 40 50
Sales Volume in Units (in thousands)

Break-even Volume
35 Total
Revenue
30
25
Total Costs
$ Millions
20
15
10 Fixed
Expenses*
0
50 100 150 200
Break-even Volume Units Sold (‘000)
(90,000)
Profit Loss
* Fixed Expenses = Marketing Expenses and Other Direct
Expenses
Break-even Regions
Cash flow
Returned capital Cumulative revenue

break-even
Cash flow breakeven
$
EVA break-even
Opportunity cost based on

capital risk assumed
P&L break-even

Financing Life Cycle
Venture
FFF & Angels Investment Banks &
Capitalist
Banks
Early Later
Seed Capital Growth Growth
& Early Stage
Enterprise Enterprise
Cash Flow Mezzanine Public Financing
3rd Market
2nd
1st Initial
Public
Offering
Time
Valley Break-even
of Death point
Emerging Growth

Demand and Supply
S
D
F G
E
Price
A B
D
0
Quantity

Economies of Scale
Average cost
LACs*
Output
*Long-run average costs (LACs)

Increasing returns to scale, or economies of scale

Elasticity
Price
e = 0 (total
Price
e=-
8
inelastic
demand)
e<-1
e=-1 e=-
8
(total elastic
demand)
e>-1
Quantity Quantity
e=0
P1
Price
(-)
P2
P1
(-)
Price
(+) P2
(+)
0 Quantity 0 Quantity
Demand is elastic and expenditure increases Demand is inelastic and expenditure increases
when price falls from P1 to P2 when price falls from P1 to P2
Inelastic and Elastic Demand
P2 P’ 2
P1 P’ 1
eci r P
Q 2Q 1 Q’ 2 Q’ 1
Quantity Demanded per Period Quantity Demanded per Period
(a) Inelastic demand (b) Elastic demand

Sales and Profit Life Cycles
Sales
Sales and Profits ($)
Profit
Introduction Growth Maturity Decline

Time

Market Potential, Market Volume,
Market Share
Volume or value
Market potential
Market volume
Market share
Time

The Product Life Cycle I
Sales over profits
Sales
Profits
Introduction Growth Maturiy Shake-out Decline
Stages over Time

The Product Life Cycle II
Introduction Growth
Unit
Sales A
Volume
B
Maturity Commodity or Decline
Time
Note: A = Moderate Growth, B = Commodity, C = Decline

The Life Cycle Portfolio Matrix
THE BUSINESS UNIT‘S COMPETITIVE
POSITION
Strong Average Weak
Development
A
C
Growth B
D
THE INDUSTRY‘S STAGE Competitive
shakeout F
IN THE EVOLUTIONARY
LIFE CYCLE
E
Maturity
Saturation
G
H
Decline

Patterns of Strategic Change
Continuity Incremental Flux Global

The Whole Product Model
Potential Product
Augmented Product
Expected Product
Generic Product

The Product-Positioning Map
High quality
E
A
B High price
Low price
C
D
Low quality

The Four P‘s of McCarthy I
Environment
Environment
Environment
Product Price
Place Promotion
Environment

The Four P‘s of McCarthy II
High quality
Marketing
Mix
Channels
Product variety
Coverage
Quality
Assortments
Design
Features Product Place Locations
Inventory
Brand name
Transport
Packaging
Sizes Target
Services
Warranties Market
Returns
Price Promotion
List price Sales promotion
Discounts Advertising
Allowances Low quality Salesforce
Payment period Public relations
Credit terms Direct marketing

Push versus Pull Strategy
Marketing
activities Demand
End
Manufacturer Intermediaries
Push Strategy users
Demand
Marketing activities
Demand Demand
End
Manufacturer Intermediaries
Pull Strategy users

The Expanded Marketing Mix
Product
Promotion Price
Customer
Service
Place People
Processes

The 6 – Step Marketing Plan
1 Situation (SWOT) Action plan 4
firm budget allocation
market product
industry promotion
competition price
environment distribution
2 Objectives
Marketing Plan
Forecasts 5
sales quantify:
market share costs
market expansion sales
leadership profits
satisfaction market share
3 Strategy Control 6
segment – target
organization structure
price / quality
measurement tools
product positioning
check frequency
differentiation
=> Corrective actions
diversification
The PDCA Cycle
Plan
Act Do
Performance
Check
Path of continous improvement
Time

Enterprise Management Process
Decision
Process
Mission & Enterprise

Strategy Structure
Customer
Satisfaction
Value Enterprise
Improvement Learning
Benchmarking

SWOT Analysis Diagram
Numerous
environmental
opportunities
Cell 3: Cell 1:
Supports a turnaround- Supports an
oriented strategy aggressive strategy
Critical Substantial
internal internal
weaknesses strengths
Cell 4: Cell 2:
Supports a Supports an
defensive strategy diversification strategy
Major
environmental
threats

SWOT Analysis I
Strengths Weaknesses
Opportunities Threats

SWOT Analysis II
STRENGTHS
STRENGTHS/ /WEAKNESSES
WEAKNESSES OPPORTUNITIES
OPPORTUNITIES/ /THREATS
THREATS
Firm,
Firm,Organization
Organization Environment,
Environment,Market,
Market,Industry
Industry
• Market share • Market size
• Key account share • Key account size
• Growth rate MARKET
• Annual growth rate
• Supply diversity • Market diversity
• Influence • Price sensitivity
• On market • Seasonality
• Purchasing / selling • Cycles
deadline
• New products cycles • Negotiation power
• Negotiation power - suppliers
- firm suppliers - consumers
- customers
COMPETITION
• Firm competitivity • Competitor types
- Product, service • Concentration level
- Profitability, H.R., … • Intrants / extrants
• Segments invested in • Market share evolution
• Firm’s integration level • Vertical / horizontal integration
• High-tech vulnerability • Technology substitution
SWOT Analysis III
STRENGTHS
STRENGTHS/ /WEAKNESSES
WEAKNESSES OPPORTUNITIES
OPPORTUNITIES/ /THREATS
THREATS
Firm,
Firm,Organization
Organization Environment,
Environment,Market,
Market,Industry
Industry
• Firm margins • Global benefits
• Economies of scale FINANCE / BUSINESS • Economies of scale
• Barriers • Barriers
• Production capacity level • Production capacity level
• Adaptability to change • Maturity / volatility

• Expertise / Know-How TECHNOLOGY • Complexity
• Patent ownership • Differentiation
• Production technology • Patents and copyrights
• Production technology
• Reactivity / Flexibility level SOCIO - POLITICAL • Attitudes / Social trends

• Adaptability • Laws and regulations
• Agressiveness • Pressure groups
• Working relationships • Trade union activities

The Generic Value Chain I
Support
Firm infrastructure
activities
gi n
Human resource management
Mar
Technology development
Procurement
Inbound Operations Outbound Marketing Service

logistics logistics and sales
ngi
Mar
Primary activities

The Generic Value Chain II
FIRM INFRASTRUCTURE
HUMAN RESOURCES MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
MARGIN
INBOUND OUTBOUND MARKETING

LOGISTICS OPERATIONS LOGISTICS & SALES SERVICE
Marketing Sales Force Sales Force Technical

Management Advertising Administration Operations Literature Promotion

The Generic Value Chain III
Firm infrastructure
Human resources management
Mar
gin
Technology development
Procurement
Mar
Inbound Operations Outbound Marketing Service
gin
logistics logistics and sales
Primary Activities

The Ansoff Matrix I
Current Products New Products
Current Market Product

Markets penetration development
New Market
Diversification
Markets development

The Ansoff Matrix II
PRODUCTS AND/OR SERVICES
Existing New
New
Market
Existing product
penetration
development
MARKETS
Market
New Diversification
development

The Customer Growth Matrix
PRODUCTS AND/OR SERVICES
Existing New
Customer Customer
Existing loyalty extension
CUSTOMERS
Customer Customer
New acquisition diversification

Product-Market Diversification
Broad
Product Diversification
Moderate
Narrow
Narrow Moderate Broad
Market Diversification

BCG’s Growth-Share Matrix I
RELATIVE MARKET SHARE
High Low
Question
High Star Mark
MARKET
GROWTH
RATE
Cash
Low Dog
Cow

BCG’s Growth-Share Matrix II
High Low
Star Question Mark

A
High
E Divest
B
D
MARKET
GROWTH
RATE F
Low C
G Divest
Cash Cows Dog

Targeted Present position
future position in the corporate
in the corporate portfolio
portfolio

BCG’s Growth-Share Matrix III
10x High 1.0x Low 0.1x
Low Star businesses Question marks
MARKET
GROWTH 10%
RATE
Cash generating
High Dog businesses
businesses

BCG‘s Growth-Share Matrix IV
Stars Question Marks

22%
20%
4
18% 1
16% 3
14% 2
12% 5
10%
Cash Cows Dogs
8%
et a R ht wor Gt e kr a M
6%
4% 6 7
2%
8
x1
x 01
x 1. 0
Relative Market Share

The New BCG Matrix
Many Fragmented Specialization

NUMBER OF
APPROACHES TO
ACHIEVE
ADVANTAGE
Stalemate Volume
Few
Small Large
SIZE OF ADVANTAGES

Underlying Relationship Between ROI and
Market Share in the New BCG Matrix
SIZE OF THE ADVANTAGE
Small Large
Stalemate Volume
ROI ROI
Few
NUMBER OF WAYS Market share Market share

TO ACHIEVE
COMPETITVE
ADVANTAGE Fragmented Specialization
ROI ROI
Many
Market share Market share

McKinsey‘s Seven ‚S‘s Framework
Structure
Strategy Systems
Superordinate
Goals
Skills Style
Staff

Disruption and the New 7-S’s
VISION PLANNING
Vision for Disruption

Identifying and creating
opportunities for
temporary advantage
through understanding
• Stakeholder Satisfaction
• Strategic Soothsaying
directed at identifying new ways to serve
existing customers better or new
customers that no one else
serves now.
Market Tactics for Disruption

Capability for Disruption Disruption Seizing the initiative to gain
advantage by
Sustaining for momentum by
developing flexible capacities for • Shifting the Rules
• Signaling
• Speed
• Simultaneous and
• Surprise
Sequential Strategic
that can be applied across Thrusts
many actions to build a series
of temporary advantages with actions that shape, mold, or
influence the direction or nature of
the competitors‘ responses.
RESOURCE PLANNING PUNCH-COUNTERPUNCH PLANNING

Core Competencies I
Banner
Brand
Business
Units
Core
Products
(Platforms)
Core
Competencies

Core Competencies II
Processes
Core
Competencies
Technologies Capabilities

Core Competencies III
Low Company View High
Competency 1
High
Competency 5
Competency 4
Market View
Competency 6
Competency 2
Low
Competency 3

The General Electric Business Screen
COMPETITIVE POSITION
Strong Average Weak
Low
INDUSTRY Medium
ATTRACITVENESS
High

Attractiveness/Competitive Position
Strategies
COMPETITIVE POSITION
Strong Average Weak

• Evaluate
potential for
•Grow • Specialize
leadership via
•Seek dominance • Seek niches
High Segmentation
•Maximize • Consider
• Identify
investment acquisitions
weaknesses
• Build strengths
• Identify
growth • Identify growth
INDUSTRY segments segments • Specialize
ATTRACTIVENESS Medium • Invest strongly • Specialize • Seek niches
• Maintain • Invest • Consider exit
position selectively
elsewhere
• Maintain • Trust leader‘s
overall • Prune lines statesmanship
position • Minimize • Sic on
Low • Seek cash flow investment competitor‘s
• Invest at • Position to cash generators
maintenance divest • Time exit and
levels divest

Company Position/Industry
Attractiveness Screen
Industry attractiveness
Low Medium High
High
HOLD BUILD BUILD
Business unit strengths

Medium
HARVEST HOLD BUILD
Low
HARVEST HARVEST HOLD

A Representative Nine-Cell Industry
Attractiveness-Competitive Strength Matrix
COMPETITIVE STRENGTHS/BUSINESS POSITION

Strong Average Weak
High Business F
Business A
LONG-TERM
INDUSTRY Medium
ATTRACTIVENESS
Business C Business B
High priority for investment

Low
Medium priority for investment
Business E Business D
Low priority for investment

GE / McKinsey Multifactor Portfolio Matrix
INDUSTRY ATTRACTIVENESS
Manage
Invest Invest Selectively
for Earnings
BUSINESS STRENGTH
Manage
Invest Selectively Harvest or
for Earnings Divest
Manage
Harvest or Harvest or
Selectively
Divest Divest
for Earnings

Portfolio Positions and
Defensive Strategic Market Plans
Very Attractive
Protect Protect
Market Attractiveness
Protect or Protect or Protect or

Harvest Focus Focus
Harvest or Harvest or Protect or

Divest Divest Harvest
Very Unattractive
Very Weak Very Strong
Competitive Advantage

Market Attractiveness – Portfolio
Classification and Strategies
BUSINESS STRENGHT
Strong Medium Weak
5.00
Invest / grow
Joints
High
Selectivity / earnings
Hydraulic Aerospace
Fittings
Pumps
3.67 Harvest / divest
Clutches
Fuel
Medium Pumps
TE KR A M
Flexible
SS E NE VI T C ARTT A
Diaphragms
2.33
Relief
Valves
Low
1.00
5.00 3.67 2.33 1.00
(a) Classification
The Risk-Reward Diagrams
High
RISK
Low High
REWARD (NPV)
Low

Contrasting Characteristics of Upstream and
Downstream Companies
Supply stages in a manufaturing industry (supply chain)
Raw Primary Product Consumer

materials manufacturer Fabricator producer marketer Retail
Consumer
Supply flow
UPSTREAM Centre of gravity DOWNSTREAM
ORGANIZATIONS of a manufacturing ORGANIZATIONS
industry
Contrasting characteristics of upstream and downstream companies

Upstream Downstream
Commodity Proprietary
Standardize Customize
Maximize end users Target end users
Low-cost producers High margins
Sales push Marketing pull
Line-driven organization Line/staff
Process innovation Product innovation
Capital budget R & D/advertising budget
Capital-intensive People-intensive
Technological know-how Marketing skills
Supply and trading/manufacturing and engineering Product development/marketing

Porter‘s Five Forces I
Potential
PotentialEntrants
Entrants
Threat new entrants
Bargaining Bargaining
Industry
power of Industry
competitors power of
suppliers competitors buyers
Suppliers Buyers
Suppliers Buyers
Rivalry
Rivalryamong
among
existing firms
existing firms
Threat of substitute products
Substitutes
Substitutes

Porter‘s Five Forces II
Firms in other
industries
offering
Substitute
Products
Suppliers of
raw materials,
RIVALRY
parts,
AMONG Buyers
components or
COMPETING
other resource
SELLERS
inputs
Potential
New Entrants

Forces Driving Industry Competition
Potential Entrants
Threat of
new entrants
Industry
Bargaining power Bargaining power
competitors
of suppliers of buyers
Suppliers Buyers
Rivalry among
existing firms
Threat of
substitute products
or services
Substitutes

Barriers and Profitability
EXIT BARRIERS
Low High
PROFITS=LOW PROFITS=LOW
Low RETURNS=STABLE RETURNS=RISKY
ENTRY
BARRIERS
PROFITS=HIGH PROFITS=HIGH
High RETURNS=STABLE RETURNS=RISKY

Four Routes to Strategic Advantage
Business/Product Offered
Old/Existing New/Creative
KFS Aggressive
KFS Aggressive
Compete initiatives
initiatives
(wisely)
Route 1 Route 3
Intensify
Intensifyfuntional
funtional
differentiation Ask
differentiation Ask„why-why‘s“
„why-why‘s“
Strategic
Relative Strategicdegrees
degreesofof
Avoid Relativesuperiority
superiority Freedom
head-on Freedom
competition
Route 2 Route 4
Exploit
Exploitcompetitor‘s
competitor‘s Maximize
weakness Maximizeuser
user
weakness benefit
benefit

The Generic Strategies I
Differentiation Cost Leadership
Focus

The Generic Strategies II
COMPETITIVE ADVANTAGE
Lower Cost Differentiation
Broad
Target
Cost Leadership Differentiation
COMPETITIVE
SCOPE
Narrow
Cost Focus Differentiation Focus
Target

Five Modified Competitive Strategies
TYPE OF COMPETITVE
ADVANTAGE BEING PURSUED
Lower Cost Differentiation
A Broad Overall Broad

Cross-Section Low-Cost Differentiation
of Buyers Leadership Strategy
Strategy
MARKET Best-Cost
TARGET Provider
Strategy
A Narrow Focused Focused

Buyer-Segment Low-Cost Differentiation
(or Market Niche) Strategy Strategy

Sweeney‘s Generic Strategies
Strategic change involves enhancing

The operation‘s structure
Marketer Innovator
Emphasizes Emphasizes
Enhanced
• Quality • Quality
Strategic change involves enhancing

• Dependability • Product/service
• Range • Performance
the operation‘s infrastructure

Customer service criteria
• Speed
• New product/service
• Development
Caretaker Innovator
Emphasizes Emphasizes
• Price/ cost • Quality
Basic
• Dependability • Product/service
• Quality • Performance
• Flexibility
• Speed
Traditional Enhanced

Geobusiness Model
CONTROL VARIABLES
MOTIVATION VARIABLES
CONDITIONING
VARIABLES

Porter‘s Diamond
FIRM
FIRMSTRATEGY,
STRATEGY,
STRUCTURE
STRUCTUREAND
AND
RIVALRY
RIVALRY
FACTOR DEMAND
FACTOR DEMAND
CONDITIONS CONDITIONS
CONDITIONS CONDITIONS
RELATED
RELATEDAND
AND
SUPPORTING
SUPPORTING
INDUSTRIES
INDUSTRIES

Resource Allocation at Corporate Level
PERCEIVED NEED FOR CHANGE
Low High
Imposed
Low „Formula“ priorities
EXTENT OF
CENTRAL
DIRECTION
Free Open
High
bargaining competition

PIMS Competitive Strategy Paradigm
Market structure Strategy and tactics Performance
•Market • Pricing • Profitability (ROS,
differentiation ROI, etc.)
• R & D spending
•Market growth rate • Growth
• New product
•Entry conditions introduction • Cash flow
•Unionization • Change in relative • Value enhancement

quality and variety
•Capital intensity of products/services • Stock (share) price
•Purchase amount • Marketing expenses
Competitive position • Distribution

channels
• Relative perceived
quality
• Relative vertical
integration
• Relative market
share
• Workforce
productivity
• Relative capital
intensity
• Relative cost

International Strategy Options
High
Joint Foreign Foreign
venture branch subsidiary
PRODUCT Joint Foreign

Licensing/ branch
DIVERSITY venture
Joint
Export Licensing/ venture
Low
Low High
MARKET COMPLEXITY

The Wheel of Competitive Strategy
Product Line Target Market
Finance Marketing
and Control
GOALS
Definition of Objectives for

how the profitability,
business is growth, market Sales
R&D share, social
going to
compete responsiveness
etc.
Purchasing Distribution
Labor Manufacturing

Generic Competitive Strategies
Return on
Investment
Market Share

The Strategic Triangle I
Multiple market segments

Target segments
Customers
V
ue al
ue
al
V
Corporation Cost Competitors
Product/service
differentiation

The Strategic Triangle II
Customers
Needs seeking benefits
at acceptable prices
V
al
ue
u e
al
V
Assets and Cost Assets and

utilization differentials utilization
Company Competitor

Trilogy Strategy - Culture - Structure
t
en En
nm vi
ri o ro
nm
v
En en
t
Strategy
Structure Culture
En t
vi
ro en
nm nm
en iro
v
t En

Optimum Degree of Formal Organization
Organizational
effectiveness
Degree of formal organization

The Flow of Formal Authority

Functional, Divisional, Multidivisional
Structures
CEO
CEO
Controlling R&D
Logistics Manufacturing Sales Finance

Cement Concrete Chemicals
CEO CEO
Europe North America Asia

Europe North America Asia
Motor Motor Motor Cement
Marine Marine Marine

Concrete
Fire Fire
Chemicals

A Matrix Design
FUNCTIONAL DEPARTMENTALIZATION
Research and
Marketing Purchasing Production
Development
Department Department Department
Department
Manager Manager Manager Manager
PROJECT DEPARTMENTALIZATION
Alpha Project
E E E E
Project Leader
Beta Project
E E E E
Project Leader
Gamma Project
E E E E
Project Leader

Models of Virtuality
The Virtual Face Star-alliance Model
Co-alliance Model Value-alliance Model

Leavitt‘s Diamond: The Interaction of Social
Forces in an Organization
Task
Structure People
Technology

Action-centred Leadership
TASK
INDIVIDUAL
NEEDS
NEEDS
GROUP
NEEDS

Belbin‘s Team Roles
TEAM
Shaper
Company Worker
t
Plan
Chairman
Finisher
ator
Monitor-Evalu
Resource-Investigator W orker
Team

Group Development
Stage V
Adjourning
Group effectiveness
Stage IV
Performing
Stage III
Norming
Stage II
Storming
Stage I
Forming
Time

Theory X and Theory Y
Theory X Vicious circle of theory X

confirms following
no responsability, strong rules

no Initiative and control
leads to leads to
passive work
attitude
Theory Y
strenghten following
no responsability, strong rules

no Initiative and control
leads to allow
Strenghten effect of Theory Y passive work

attitude

Maslow‘s Hierarchy of Human Needs I
Self-Actualization
Needs
(self-development and
realization)
Esteem Needs
(self-esteem, recognition, status)
Social Needs
(sense of belonging, love)
Safety Needs
(security, protection)
Physiological Needs
(hunger, thirst)

Maslow‘s Hierarchy of Human Needs II
GENERAL EXAMPLES ORGANIZATIONAL EXAMPLES
Achievement Self- Challenging Job

Actualization
Needs
Status Esteem Needs Job Title
Friends in
Friendship Belongingness Needs Work Group
Stability Security Needs Pension Plan
Shelter Physiological Needs Base Salary

Herzberg‘s Motivator-Hygiene Theory
HYGIENE FACTORS MOTIVATORS
•SALARY
•SALARY
•ADMINISTRATION
•ADMINISTRATION •ACHIEVEMENT
•ACHIEVEMENT
•SUPEVISION
•SUPEVISION •RECOGNITION
•RECOGNITION
•COMPANY
•COMPANYPOLICY •RESPONSIBILITY
•RESPONSIBILITY
POLICY
•STATUS
•STATUS •ADVANCEMENT
•ADVANCEMENT
•WORKING
•WORKING •NATURE
•NATUREOF
OFWORK
WORK
CONDITIONS
CONDITIONS

Parallels Among Need Theories of Motivation
Herzberg‘s Maslow‘s Alderfer‘s Other

Two-Factor Theory Hierarchy of Needs ERG Theory Key Needs
Achievement
Need for
Work Itself Self-Actualization
Achievement
Responsibility Needs
Motivation Growth
Advancement and Growth
Factors Needs
Need for
Self-Esteem Power
Recognition Esteem Needs
Respect of Others
Supervision Need for

Belongingness Needs Relatedness
Interpersonal Relations Affiliation
Needs
Hygiene Interpersonal Security

Security
Factors Security Needs
Company Policies
Physical Security
Existence
Pay Physiological Needs
Working Conditions Needs

Concern for people
Managerial Grid
9
Country Club Management (1,9) Team management (9,9)
Production is incidental Production is from

8
to lack of conflict and integration of task

„good fellowship“ and human requirements
7
Dampened Pendulum (5,5)

6
(Middle of the road.)

Push for production but
don‘t go „all out“. Give some
5
but not all all: „be fair but firm“
Impoverished Management (1,1)

4
Task Management (9,1)

Effective production is
Men are a commodity
3
unobtainable becaus people are

just as machines.
lazy, apathetic and indifferent.
A manager‘s responsibility
Sound and mature relationships
is to plan, direct and
2
are difficult to achieve because,

control the work of those
(human nature being what it is)
subordinate to him
conflict is inevitable
1
1 2 3 4 5 6 7 8 9
Concern for production
Situational Leadership
LEADER BEHAVIOUR
Share ideas Explain
and facilitate decisions
RELATIONSHIP BEHAVIOUR
in decision- and provide
making NG opportunity
TI
(Supportive Behaviour)
PA
CI for
TI
SE
R clarification
PA
LL
IN
S3 S2
G
NG
TE
TI
LL
GA
Provide
IN
LE
G
specific
DE
Turn over instructions

responsibility for and closely
decisions and supervise
S4 implementation performance S1
TASK BEHAVIOUR
(LOW) (HIGH)
(Guidance)
FOLLOWER READINESS
HIGH MODERATE LOW
R4 R3 R2 R1
Able and Willing Able but Unwilling Unable but Willing Unable and Unwilling
or Confident or Insecure or Confident or Insecure
FOLLOWER DIRECTED LEADER DIRECTED

Cultural Web
Stories
Rituals and
routines Symbols
THE
PARADIGM
Control
systems Power
structures
Organizational
structures

Dynamics of Paradigm Change
Development of Corporate
The paradigm Development of Implementation Corporate
The paradigm strategy Implementation Performance
strategy Performance
if unsatisfactory
Step
Step11
Tighter
Tighter
controls
controls
Step
Step22
Reconstruct
Reconstructoror
develop
developnew
new
strategy
strategy
Step
Step33
Abandon
Abandonparadigm
paradigm
and
andadopt
adoptnew
newone
one

Four Organizational Cultures
Power Culture Role Culture
Task Culture Person Culture

Integrated Model of Strategic Management
Vision,
Vision,values,
values,
and expectations
and expectations
Strategy
Goals, Strategy Policies
Mission Goals, formulation Policiesand
and
Mission objectives formulation procedures
objectives procedures
• •Alternatives
Alternatives
• •Evaluation
Situation Evaluation
Situationanalysis
analysis and
andchoice
choice
• •Enviromental
Enviromental
opportunities/
opportunities/
threats
threats
• •Organizational
Organizational
resources
resourcesand
and
competences
competences
Strategy
Strategy
implementation
implementation
and
andplanning
planning
Strategic control
Why? What? How? Guidelines

M-O-S-T
Mission
Mission
WHAT
WHAT ananorganization
organizationisisseeking
seekingtotododo
Objectives
Objectives
Strategy
Strategy
HOW ananorganization
HOW organizationwill
willachieve
achieveitit
Tactics
Tactics

Network Analysis, PERT, CPA
5 C 7
2 4
6 2 8 G
A
4 12
5
0 D 6
1 12
0 1
B E
4 H
5
4 3
3 F
4 9
5 5
KEY: 9
Activity
Critical path
Event
Earliest event time
Event number
Latest event time

The Five Phases of Growth
Large collaboration
coordination
"?"
delegation
SIZE OF red tape
ORGANIZATION
direction control
creativity
autonomy evolution: stages of
growth
revolution: stages of
Small leadership crisis
Young Mature
AGE OF ORGANIZATION

The Chasm
The
The Early Mainstream
Market Market
The
Chasm
Te
c Vi Pra Co Sk
En hnol sio g ma n se r ep
thu o g n ari vat tic
sia y es tist s
sts s ive
s

Inventory Profile
Steady and
Order predictable Slope = demand rate
quantity demand (D)
Q
Average inventory = Q / 2
Inventory
level
Time
Q/D
Instantaneous deliveries at rate of D / Q per period

Economic Order Quantity
Total costs
Costs
Holding costs
Economic order Order costs

quantity (EOQ)
Order quantity

Pareto Curve for ABC-Products
Cumulative % of total value
Class A Class B Class C

items items items
% of total number of items

CIM-Concept
CIM
CAD/CAM PPS
Production Programm Planning
C
CAD
Quantity Planning
CAP A Time and Capacity Planning
Place Order
CAM
D Control Order

The Business Process Re-engineering
Approach
Micro operations
Function 1 Function 2 Function 3 Function 4

s dee n r e mot s u C
s ess ec or p ss e ni s u B
delli fl uf s dee n r e mot s u C

Activity 1 Activity 2 Activity 3 Activity 4
noit ar e po or ci M
s dee n r e mot s u C
ec or p ss e ni s u B
e n r e mot s u C
Total Quality Management
• Whole operation involved

• Quality srategy
• Teamwork
• Staff empowerment
• Involves customers and suppliers
• Quality systems
• Quality costing Inspection
• Problem solving
• Quality planning
Quality control
• Statistical methods
Quality assurance
• Process performance
• Quality standards Total quality management
• Error detection
• Rectification

Supply Chain Management
Second-tier First-tier First-tier Second-tier
suppliers suppliers customers customers
The
Operation
Supply side Demand side
Purchasing and supply Physical distribution

management management
Logistics
Materials management
Supply chain management

Internal Rate of Return (IRR)
Main methods of capital expenditure appraisal
Return on Investment ROI Pay Back Discounted Cash Flow (DCF)
Net Present Value (NPV) Internal Rate of Return (IRR)

Net Present Value (NPV)
Main methods of capital expenditure appraisal
Return on Investment (ROI) Pay Back Discounted Cash Flow (DCF)
Internal Rate of Return (IRR) Net Present Value (NPV)

Variance Analysis
Profit Variance
Total Cost Variance Total Sales Variance
Materials Labour Variable Fixed Sales Sales

Price Variance Overhead Overhead Volume Price
Variance Variance Variance Variance Variance
Materials Materials Wage Labour

Price Usage Rate Efficiency
Variance Variance Variance Variance

The Link Between the Balance Sheets and the
Income Statement
Balance Sheet Income Statement Balance Sheet
December 31, 2001 Year 2002 December 31, 2002
Liabilities Liabilities
Assets $100 $113
Assets
$170
$190
Owner‘s equity
$70 Owner‘s equity
Expenses $77
Revenues $469.8
$480
Net Profit
$10.2
Retained earnings
$7
Dividends
$3.2

Working Capital
Simple cycle of operations
Cash
Raw materials
Receivables inventory
Finished goods
inventory

Financial Strategy Framework
Due dilligence process Investor Investment strategy Alternative Investments
Time to close deal Risk/Reward Space
Financial Strategy Opportunity
Debt
Entrepreneurial concerns
Sources and Deal
Time to out of cash Equity
Structure
Future alternatives Other
Burn Rate
Operating Financial Business Strategy

Requirements Requirements
Working Capital
Market Strategy Technological Strategy

Asset Requirement

Investor Perceived Risk-Return Space
Angels
High
FFF
VCs
Entrepreneur
PERCEIVED
Moderate
RETURN Realistic
Investors
Banks
Low
Low Moderate High

PERCEIVED RISK

Du Pont Scheme
Return on equity
Earnings after tax
ROE = Owner‘s equity
Return on invested capital

Earnings before interest and tax Financial leverage multiplier Tax effects
ROIC =
Invested capital
Operating profit margin Capital turnover Financial structure ratio Financial cost ratio Tax effect ratio
Earnings before interest and tax Sales Invested capital Earnings before tax Earnings after tax
Sales Invested capital Owner‘s equity Earnings before interest and tax Earnings before tax
Sales Invested capital Owner‘s equity Cost of debt Tax rate
Cash
Operating costs
Working Capital
requirement
Fixed assets

The Drivers of Value Creation
EBIT
Operating margin = Sales EBIT
Invested capital
(pretax ROIC)
Sales
Capital turnover = Invested capital Expected after tax
ROIC
Tax effect = (1 – Taxe rate)
Return spread
Percent of (ROIC – WACC)
debt financing Market Value Added (MVA)
Aftertax cost of debt Weighted average
cost of capital If the present value of the future stream of
WACC expected return spreads is positive, MVA is
Estimated cost of equity Percent of positive and the higher the growth, the more
equity financing value created.
If the present value of the future stream of

Economic, political, and expected return spreads is negative, MVA is
social environments negative and the higher the growth, the more
value destroyed.
Sustainability
Market structure
of growth
Competitive advantages and

core competencies

Business Design Process
Economics
Economics
What
Whatare
are
the
thekey
key What What are my
Changing assumptions What‘s How can What What are my
Changing assumptions What‘s How can dimensions choices
About important dimensions choices
importanttoto profit
Customer
Customer About profitbebe matter
matterthe now?
Priorities customers customers? made? the now?InInthe
the
Priorities customers customers? made? most? future?
and most? future?
and
economics?
economics?
Technology
Technology
Are
Arethe
thebest How
best What‘s my How long HowcancanI I
Which choices What‘s my How long prepare
Which choices best will prepare
ones internally best willthis
this for
ones internally business design for
are business designbebe
arebest? consistens ongoing
best? consistens design? valid? ongoing
integratable? design? valid? redesign?
integratable? redesign?

The Company Center of Gravity
The Entrepreneurial Phase The Growth Phase The Success Phase
The Center
The Center of Gravity
of Gravity
The
center
of
gravity
The The The The The The

Company Customers Company Customers Company Customers

The Traditional Value Chain
The Traditional Value Chain

Start with Assets, Core Competencies
Assets/ Product/
Inputs, Raw The
Core Service Channels
Material Customer
Competencies Offering
The Modern Value Chain

Start with the Customer
Assets/
The Inputs, Raw
Channels Offering Core
Customer Material
Competencies

The Modern Value Chain
Truly Understanding the Customer
Purchase Criteria
Customer Anger
Preferences
Power
Assets/
Customer Inputs, Raw
Decision-Making Process Channels Offering Core
Priorities Material
Competencies
Purchase Occasion
Buyer Behavior
Functional Needs
Systems Economics

Customer Solutions Profit
Profit

Product Pyramid Profit
Price
Volume

Multicomponent Profit
Base Business
Other Components

Switchboard Profit
Buyers Sellers

Time Profit
$/Unit
Cost
Price
Time

Blockbuster Profit
$/Project
Revenue
Cost
Project Type

Profit Multiplier Model
Other Forms
Key Asset

Entrepreneurial Profit
Base
Business
Spin-Outs

Specialization Profit
Return on Sales
Generalist Specialist

Installed Base Profit
Profit Margin
Hardware/Base Consumables/
Product Follow-on Product

De Facto Standard Profit
Profit Margin
Market Share

Brand Profit
Price/Unit
Market Brand
Price Price

Specialty Product Profit
100 %
S
Revenue
Five Years Today

Ago

Local Leadership Profit
Profitability by Region
Local Market Share

Transaction Scale Profit
$/Unit
Revenue
Cost
Size of Transaction

Value Chain Position Profit

Cycle Profit
$/Unit Price
Cost
Utilization

After-Sale Profit
Base Follow-on
Product Products/Services

New Product Profit
Time

Relative Market Share Profit
Return on Sales
Relative Market Share

Experience Curve Profit
Cost/Unit
Cumulative Experience

Low-Cost Business Design Profit
$/Unit
Conventional Low Cost

Business Business
Design Design

GE's Business Design:
„Sell the Solution, Not Just the Box“
Sell the Box, or ...
Product
... Sell the Whole Solution

The Profit Zone
Options Accessories Financing Services

Product

The SMH Product Pyramid
The Profit Zone
Blancpain
Omega, Longines,
Rado
Tissot, Certina, Mido, Pierre Balmain,

Hamilton, Calvin Klein
Swatch, Flik Flak

Endura
Lanco

Coca-Cola's Business Design:
Manage the Value Chain
1980
Distribution
Consumer Grocery Logistics Bottling Syrup
Coca-Cola
Fountain
Brand
Vending
1996
Distribution
Consumer Grocery Logistics Bottling Syrup
Fountain Coca-Cola
Mega Brand
Coca-Cola, diet Coca-
Vending Cola, Caff. Free, diet
Caff. Free, Cherry,
The Profit Zone Diet Cherry
Coca-Cola‘s participation, influence
no participation

The Charles Schwab "Switchboard"
Mutual Fund
Investors Companies
Mutual Fund
Investors Companies
The Profit Zone

Schwab
One Source

Intel's Business Design: „Two Steps Ahead“
The Profit
Zone
Intel
$/Unit
AMD
Cost
Price
Q2 Q4 Q6 Q8 Q10
Quarters Post-Launch

Disney‘s Business Design Reinvention
The Profit Zone
The Value Capture
Cruises Publishing Videocassette
Hotels Television Retail
Merchandise Theme Parks Music
Animated and Live-Action Films

The Thermo-Electron
"Spin-Out“ Business Design
The
Profit Zone
Thermo
Thermo Spectra
Instrument
Systems Thermo
Optek
Thermo
Voltek
Thermo-Electron Thermedics
Thermo
Sentron
Thermolase
Thermo
Trex
Trex
Medical

Microsoft's Business Design:
Create-the-Standard
OEMs
The Profit Zone
Microsoft
Applications
Windows Customers
Applications
Developers

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Services, money Taxes

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IMMEDIATE INDUSTRY &

Rival Firms Buyers

The Economy at large

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Sales Volume in Units (in thousands)

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Returned capital Cumulative revenue

Cash flow breakeven

Opportunity cost based on

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*Long-run average costs (LACs)

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Introduction Growth Maturity Decline

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Sales over profits

Introduction Growth Maturiy Shake-out Decline

Stages over Time

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Maturity Commodity or Decline

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Continuity Incremental Flux Global

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Path of continous improvement

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Mission & Enterprise

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• Adaptability to change • Maturity / volatility

• Reactivity / Flexibility level SOCIO - POLITICAL • Attitudes / Social trends

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Inbound Operations Outbound Marketing Service

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INBOUND OUTBOUND MARKETING

Marketing Sales Force Sales Force Technical

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Human resources management

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Current Products New Products

Current Market Product

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PRODUCTS AND/OR SERVICES

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PRODUCTS AND/OR SERVICES