1

WEEKLY DIARY 5
 2
WEEKLY DIARY 5

SUBJECT: STRATEGIC MANAGEMENT

SUBMITTED TO: SIR SULEMAN ANWAR

BY: Fatima Nasir

ROLL NO: 181230016

 3
WEEKLY DIARY 5

REPORTING:
The Lecture Consisted of two parts in the first one we saw a video lecture by Michael Porter related to porter
forces and its impact on various industries and the second part consisted of Value chain, cultural perspectives and
internal assessment.

Lecture was helpful in increasing our understanding towards the External audit and its Frame work we are going to
adopt for our project.

RELATING:
We can relate the External Audit with our Business Research method (In which we analyzed the industry and done
Porter forces analysis for our research work) We can relate to our Marketing course in which we learned about
demographic and many variables to select the target market and read the Porter forces and its importance for the
targeted market, We had the same course in our BBA (Hon.), where we only studied the terms and the process of
audit in theory.

REASONING:

RECONSTRUCTING:
In the lecture we discussed

 Video lecture in this we saw a video related to competitive strategy by Michael Porter. Firstly we saw
A. Industry analysis in this we saw the five forces that impact an industry based on their profitability
the forces are Rivalry among existing competitor (it can either be a cut throat, defensive etc), Threat
of new entrant (if it’s easy it can erode the attractiveness of the industry), Threat of substitute (the
products that can do the same), Bargaining power of supplier (buying raw material and other stuff
which the supplier can manipulate to its profitability), Bargaining power of buyer (they can expect
services they don’t pay for or they lift profit by demanding). These forces will determine the
industry is profitable or mediocre. Strength of competitor forces that determines its it are as follow
 4
WEEKLY DIARY 5

I. Intensity of rivalry (it can be based on industrial growth, switching cost, brand identity etc)
then we saw an example of Pharmaceutical industry (why this industry is profitable) we can
see it by using the 5 forces on the industry Bargaining power of buyer (consumer, the doctor
and insurance company) they are not price sensitive, Threat of new entry (it is quiet
expansive, need a sale force, R&D etc), Bargaining power of Supplier (Supplier have no
power in the industry because the ingredients are common commodity and very little part of
the total cost), Threat of substitute (Very few substitute), Rivalry (the industry does not
compete on price but compete on the brand reputation and quality of their sale force). So all
the forces in this industry are favorable. Then we seen the airline industry in which we
discussed how government is added as the sixth force but we see the effect of government on
the 5 forces. Government can have positive or negative effect on the industry Under
regulation Bargaining power of buyer (Fixed prices for customer), Threat of new entry (no
new airlines so entry barrier are high), Rivalry (No new routes, no rivalry) so the industry
was profitable but under deregulation Bargaining power of buyer (price sensitive buyer and
not brand loyal), Threat of new entry (it is quiet low), Bargaining power of Supplier (are also
high), Rivalry (lots of competitor with high fixed cost) so the industry becomes unfavorable..
Some Industry are attractive by looking at the profitability, but industries are not static the
structure can change due to environmental forces (new technology) and companies strategies
can also change the structure. We then looked the pharmaceutical industry in the light of
government force which control the cost so buyers are now price sensitive: Generic drugs
are the drug that does not have name of manufacturer but have the same chemical
composition, bio technology. Bio technology also impacts the industry it is reducing the cost
of developing new drugs so lower the entry level. These three changes Cost containment,
generic drug and biotechnology all affecting the industry by reducing its profitability. In
some industries structural change is positive Like in airlines Hub and spoke route system this
increased the competition also raised the barrier to entry, Technology has revolutionized the
industry and raised barrier to entry and Frequent traveler program in this airline give free
travel to consumer who meet the certain criteria it has increased the barrier to entry.

Industry analysis is the starting point of any strategy and we have understood the structure,
Focus attention to significant force, watch the industry change, Companies can change their
destiny and companies can even destroy their industry. All strategies should be in the light of the
forces.
 5
WEEKLY DIARY 5

B. Competitive Positioning To be a superior performer in the industry one must have competitive
advantage and can do continuous improvement. There are two type of competitive advantage it it
either be Low cost or differentiation (unique benefit for customer at premium cost). Competitive
scope It can either be broad (wide range of consumer with large range of product line) or narrow
(narrow range of customer with narrow range of product line) These competitive advantage and
scope are called generic strategies. From this we have four range of advantages Broad cost, Broad
Differentiation, Focus cost and Focus Differentiation. The worst strategy is to be stuck in the middle
and they will be below average performer in the industry.
C. Cost Leadership in this a company trying to achieve cost leadership a company to have a lower
cost than its competitor but don’t get their prices to too low we see the example of P&G soap
IVORY the basic strategy was to make a simple product and accidently it also floated along with
slogan of purity. They highly advertised and in it baby became its symbol meaning if its mild
enough for children it will be for adults as well. Dial used first to add deodorant and Dove used skin
care ingredients but Ivory on the other hand kept things simple with its purity slogan. So Ivory
moved from broad differentiation to Broad cost. In term of packaging Ivory used simplicity with
bundle of soaps with an idea that it can be used for whole family. What makes Low cost of Ivory air
bubbles reduced the ingredient, No additives, No beauty ingredients, simple packaging, Low cost of
advertisement because of brand image and less trade promotion so all of these results in low cost. So
in Generic advantage it competes with broad differentiation product (Dove and dial) along with
focus cost products (no brand name). Then after this we had seen an interview of John Pepper
president of P&G. The summary is that consumer view is important and continuity of product. The
lesson from Ivory we Chose different strategy, implement over time: be consistent (it confuses the
market place and Strategy must respond to market change (shifting a strategy is risky and time
consuming).
 Value Chain Our main concern in this is to discuss all the intermediaries from extraction of raw material to
finished good to the final customers, it starts from supplier to manufacturer then from distributor to retailer
and finally to the consumer this is called industry value chain. Supply Chain (value added) for arranging the
supplies the supplier had to bear some cost and its called material cost then supplier add some profit margin
to it and manufacturer purchase at that price of supplier and will become its cost along with manufacturing
cost and in that he adds his profit margin place a price and distributor pick at that price and it becomes its
cost along with service and transportation cost and he add profit margin to it and set the price and then
retailer buy the product on that price and adds their profit margin and this will be supplied to consumer on
that total Cost. In all this value addition process we have two type of costs Value added cost (the cost add
 6
WEEKLY DIARY 5

features and functionality increases in the product) and Non Value added cost (cost that a product and service
does in result in value addition but you have to bare it like maintenance cost, ordering cost etc). Organization
try to reduce this non value added cost for this purpose we use strategies like Just in time (we minimize our
inventory: we reduced inventory maintenance cost, carrying cost), Kanban production pulls system, TQM
principles, Jidoka principle (quality at the source by identifying problems at the source), Kaizen approach,
quality assurance etc

 Value web in a industry many supplier, manufacturer, retailer, distributor at a single point in time and all of
them are working together in a integrated manner and their combined status is called value web.
 Difference between supply chain and value chain Supply chain (extraction of value: production cost,
distribution efficiencies and market potential) is the process of all parties involved in fulfilling a customer
request and in value chain (creation of value: concept like value retention, value expansion and value
creation) is a set of inter related activities a company uses to create a competitive advantage. Between both
Value and supply chain we have transport chain which will facilitate the movement of product from one
place to another. Value Co-creation is a management initiative or a form of economic strategy that bring
different parties together (company and group of customers), in order to jointly produce a mutually valued
outcome.
 Supply chain management Right product (efficiency and effectiveness in the product) at right time
(demand level is appropriate) at right cost (cost leadership or cost minimization) at right place (Easily
available to customer) in right condition (without any fault in the product). We also name this process as
value facilitation, for this purpose we have to critically analyze the responsiveness with cost (sometime we
have to create a tradeoff between these two). We also have to see the material flow, cash flow, information
flow and service.
 Video related to Fedex and UPS and their supply chain network
 Paradigm shift in Supply Chain Management Old paradigm is that a firm gain synergy as a vertically
integrated unit encompassing the ownership and coordination of several supply chain activities.
Organization culture emphasized short term, company focused performance. The New paradigm is that a
firm in a supply chain focuses activities in its are of specialization and enters into voluntary and trust based
relationships with supplier and customer firm. In this way all the participants in supply chain benefits,
boundaries are dynamic and extended from the firm’s suppliers and from supplier to its customers and
supply chains now deals with Reverse Logistics to handle returned products, warranty repairs and
recycling.
 Supply chain vs. Demand chain In supply chain we have the data base of customer relationship
management an in demand chain simultaneous consideration of variable demand and supply in enterprise
synchronization decisions. Demand chain is the management of relationship between supplier and customer
to deliver the best value to the customer at least cost to the demand chain as a whole. Customer relationship
 7
WEEKLY DIARY 5

Management (CRM) is an approach to manage a company interaction with current potential customers. It
uses data analysis about customer’s history with a company to improve business relationships with
customers, focusing on customer retention and ultimately driving sale growth. In Supply chain management
is what a firm is doing to create value. Marketers have traditionally focused on downstream side. Upstream
meaning toward the supplier side and in downstream toward buyer side. In case of supply chain we use
make and sell view (marketing planning start from raw material and product input) and in case of demand
chain sense and response view (Marketing planning start with the needs of targeted customer). Value
delivery network is the network made up of company supplier, distributor and customers who partner with
each other to improve the performance of the entire system.
 Demand driven supply network It is a method of supply chain management which deals with building
supply chain in response to demand signals. The main force of DDSN is customer demand while in the
Supply chain DDSN use the pull technique. DDSN use the capability model that consists of four levels
which are Reacting, Anticipating, Collaborating and lastly Orchestrating. The first two levels focuses on
internal supply chain while the last two level concentrate on external relations throughout the extended
enterprise (it is a concept that a company does not operate in isolation because its success is dependent
upon a network of partner relationship)
 Bullwhip effect Variation in demand is exaggerated, as information moves upstream away from the point
of use and due to infrequent demand and inventory level information exchange and order batching.We can
lower the effect by using our DDSN networks.

 Supply chain management VS Logistics and procurement Logistics management is a small portion of
supply chain management that deals with management of goods in an efficient way. While Supply chain
management is broader term which refers to the connection and relationship right from supplier to the end
consumer. Supply Chain Management is the management of a network of relationship within a firm and
between interdependent organizations and business units consisting of material supplies, purchasing,
production facilities, logistics, marketing, and related systems that facilitate the forward and reverse flow of
materials, services, finances and information from the original producer to the customer with the benefits of
adding value, maximizing profitability through efficiencies, and achieving customer satisfaction. Logistics
It is the process of strategically managing the procurement, movement and storage of materials, parts and
finished inventory (and the related information flows) through the organization and its marketing channels
in such a way that current and future profitability are maximized through the cost-effective fulfillment of
orders. Meaning of procurement Procurement include developing fundamental requirement, market
research evaluation, sourcing, standards of quality, financing purchase, negotiating price, buying goods,
inventory control, and disposal of waste products like the packaging. In the overall supply chain process,
procurement stops once your company has possession of the goods. To make a profit, the cost of procuring
your goods must be less than the amount you can sell the goods for, minus whatever costs are associated
 8
WEEKLY DIARY 5

with processing and selling them. This also includes meeting the specifications, accessing risks and manage
tendering etc. Procurement is the process of getting the goods you need, while supply chain is the
infrastructure (which is extensive in many cases) needed to get you those goods. Purchasing The term
purchasing generally means the process of ordering and receiving products and services.  The process
involved in purchasing include request for goods, approving and making of record for purchase and
receiving products.
 Corporate value chain There are two type of activities performed within an organization they are Primary
activities (it involves directly in the making of product and delivery of services they include inbound and
outbound logistics, operations, services and marketing and sale) and other are support activities (activities
that help to perform the primary activities they include firm infrastructure, HRM, technology department
and procurement). This is the part of internal audit and we see the strengths and weaknesses in an
organization. Then we discussed the online business value chain.
 Internal Value chain in this we discuss the functional focus (in which information is transferred inter
departmental) but when we discuss but a step ahead we have Company focus we have concern of logistics
concern of supply chain, Upstream relation with supplier and downstream customer relation and a step
ahead we have linked value chains every group like supplier, supplier’s supplier, customer and customer’s
customer all have their own Functional and Company focus.
 Cultural Competence the ability to interact effectively with people from different cultures beyond the
boundaries of their own cultural interpretations and biases. So we have to know how the business is
operating in lower and high context culture countries.
 Importance of cultural understanding we take business impact on y axis and time/period of engagement
on x axis from low to high. The minimum impact is to recognize (awareness increases) then we have
respect (appreciate cultural differences) then we have reconcile (resolve cultural differences) then we have
the highest one realize and root (implement reconciling actions).
 Hofstede’s Dimensions of National Culture In this we have six dimensions. Like Individualism (in this
we see how needs and goals are prioritized to the needs and goals of the group/organization),
Masculine/Feminine (in feminine environment is more nurturing and caring while masculine environment
is more towards achievement orientated), Uncertainty Avoidance (how comfortable are the people the way
they work or live or prefer known systems), Power distance (the degree the people are comfortable with
influencing upward, accept of inequality in distribution of power in society), Time perspective (long term
perspective, planning for future, perseverance values vs. short time past and present oriented) and
Indulgence/restraint (allowing gratification of basic drive related to enjoying life and having fun vs.
regulating is through strict social norms) . Then we see the example of various countries in term of every
dimension. We also discussed the Hofstede model in prospect of Pakistan.
 Priorities of Cultural Value In this we have three theories we discussed Theory A (American society),
Theory B (Japanese society) and (after the world war II the Japanese firm faced cultural shock in their
society in respect to American so a a new) Theory Z (Modified American)was developed. In this we
develop a new theory based on two cultures in this case we developed new theory Z for the survival of firm
if we move cross cultural.
 9
WEEKLY DIARY 5
Conclusion:
The lecture was conclusive and demanded our theoretical knowledge to be in physical/solid
(project) form. We Porter force on base level in videos then we also learned Value Chain, value
web, Supply chain, Demand chain, Hofstead model and Cultural aspect a firm face cross cultural.
This project will help us enhance our knowledge.