Need for STM Tools & Techniques

A number of conceptual tools or techniques have been used

to identify and evaluate strategies. Managers must decide on
the extent to which these will be used in strategic and
operational decision-making process.

The STM tools and techniques help in answering the following

fundamental questions of business, enabling the managers
to take right decision.

What is the organization’s business?

Who is the target customer for the organizations’ product
and services?.
Where are the customers and how do they buy? What is
considered “value” to the customer?

Contd./-
 Tools and Techniques (Continuation)

 Which business, products and services should be included or

excluded from the portfolio of offerings?
 What is the geographic scope of the business?
 What differentiates the company from its competitors in the
eyes of customers and other stakeholders?
 Which skills and capabilities should be developed within the
firm?
 What are the important opportunities and risks for the
organization?
 How can the firm grow, through both its base business and
new business?
 How can the firm generate more value for investors?
 Porter’s five forces

Threats of
New
Entrants

Bargaining Rivalry Among Bargaining

Power of Existing Power of
Suppliers Competitors Buyers

Threats of
Substitutes
 Five Force Model
1. Porter develop his Five Forces analysis in reaction to
the then-popular SWOT analysis, which he found
un-rigorous and ad hoc.

2. It has been applied to a diverse range of problems,

from helping businesses become more profitable to
helping government stabilize industries.

3. Strategy consultants occasionally use Porter’s Five

Forces Framework when making a qualitative
evaluation of a firm’s strategic position and also to
understand reasons for industry profitability.
 Competency Models and Layers

Conceptual skills
Planning
Organizing
Decision Making
Management Process
Ethical Judgment
Organizational Architect
Strategic Thinking

Core Competency Skills

Interpersonal Skills Personal Skills Technical Skills
Leadership Motivated
Motivator Innovative
Risk Management Process
Negotiations Experienced
Consensus Builder Communication
Risk Analysis
Team Builder Consultative Risk Controls
Risk Financing
Business Skills Enterprise Risk Management
Accounting Management Project Management
Economics Informations Insurance Knowledge
Finance Technology Vendor Petitions
Legal Marketing ERMS and Claims Management
Compliance Operations
Human Resources Statistics
Audit Security
Safety
 Competency Layers

 The model builds from the vision, values and

strategic business priorities of the organization.
 Establishing a clear competency structure is one of
the first and fundamental steps in profile
development.
 Three basis criteria for competency structures design :
a. The competency profiles must include the competencies that
employees must have, both now and in the future, to ensure that
organization can achieve its vision and support its value.
b. The competency profiles must support all of their intended
applications.
c. All competence profiles must be easy to use by all stakeholders.
 Strategy Group and Global Auto Industry

High
Bentley, Ferrari, Jaguar, Maserati, Porsche, Rolls-Royce

,
Audi BMW, Cadillac, Mercedes, Lincoln
Average price of the product

Chrysler, Honda, Ford, Opel,

Toyota, Volvo, VW

Fiat, Doge, Mitsubishi,

Nissan, Peugeot, Renault, Rover, Skoda

Hyundai, Kia

Low

Narrow Breadth of the product line Broad

 Purpose of Strategic Group in
Global Auto Industry

 Preserve advantage in imperfectly competitive

condition
 Reduce uncertainty and therefore obtain
stability
 Create entry barrier for other groups.
 Criteria for analyzing differences in Strategic groups

 Vertical and Horizontal integration

 Geographical market segmentation
 Ownership Structure
 Company Size
 Capacity Utilization
 Cost Structure
 Sales channels
 Market activities
 Brand ownership
 Product diversity
 Product quality
 R&D capability
 Criteria for analyzing differences in Strategic groups

 State the influencing economic factors and most importantly, mention

the purpose of your industry analysis.
 The concise overview of the industry should include its competitors
and their operations.
 Write about similar products and services
 Detailed analytical presentation of the specific industry.
 Highlight factors like geographical growth, consumer base, price
fluctuations, past performances and income projections.
 Use existing financial data and industry understanding to forcast
industry growth for the next five or ten years.
 Using Porter’s Five Forces model, construct a detailed write-up about
its five factors, its use and repercussions in the industry.
 Include governmental regulations relevant to the industry.
 Provide analysis of long-term and short-term valuations impacting the
industry such as any foreseeable problems impacting the business in a
negative fashion and potential corrective measures.
 Summarize with recommendations and thoughts
 Industry Analysis Map

Products and Services

Products and
Services
Future opportunities

Target Market
Location Competition
Types of customers No. of Competitors
Future Markets Competitive
Brands Strategies

Market Analysis
Market Trends
Market Needs
Market Growth
 The BCG Matrix

High

?
Business Growth Rate

Invest Diagnose

Low
Encash Liquidate or divest
High Low
Relative Position (Market Share)
 Some Limitations of the BCG Matrix

 The Link between market share and profitability is

questionable since increasing market share can be very
expensive.

 The approach may over-emphasize high growth, since it

ignores the potential of declining markets.

 The model considers market growth rate to be a given. In

practice the firm may be able to increase or expand the
market.
 Basic Pest Analysis (4 Factors)
Extended PESTEL Analysis (6 Factors)
With Demographic Factors (7 Factors)

Environment
al Factors

Technological
Legal/Regula factors
tory
Conditions

PESTEL

Political Sociocultural
Factors forces

Economic
conditions
 VALUE CHAIN

Firm Infrastructure
activities

Human Resource Management

Support

Technology Margin
Procurement

Inbound Operational Outbound Marketing Services

Primary logistic logistic and sales
activities Margin
 Value Constellation

The Environment
Corporation
Firm
Money, information
addressable Customers Customers
resources The Firm
Customers
Offerings

Firm Information
External specific
Companies Resources Offerings
Firm
addressable
resources Money, information
Competitors

Based on more relationships, more complex dynamics

 Generic Strategies

Target Scope Advantage

Low cost Product

Uniqueness

Broad Cost Leadership Differentiation

(Industry Wide) Strategy Strategy

Narrow Focus Strategy Focus Strategy

(Market Segments) (Low cost) (Differentiation)
 Model of Competitive Rivalry

Inter-firm Rivalry

* Likelihood of Attack
* Organizational Size Outcomes
Drivers of Competitive * Quality
Competitive Analysis Behaviour * Market
* Market commonality position
* Likelihood of Response
* Resource Similarity * Awareness * Type of Competitive
* Motivation Action * Financial
* Ability * Market Dependence performance

Feedback
 India’s Position in Global Competitive Position in Indian
Software/Outsourcing market

High
Philippines India

BCG Approach
Quality and to understand
Sophisticatio India’s
n China Competitive
CIS position

Low
Mexico

Low High

Technical Expertise
 Classifying Companies based on Global Reach

GLOBAL TRANSNATIONAL

Views the world as a Specialized facilities

High
single market. permit local
Operations are controlled responsiveness. Complex
centrally from the coordination
Corporate Office mechanisms provide
Need for global integration
Integration
INTERNATIONAL MULTINATIONALS

Uses existing capabilities Several subsidiaries

Low to expand into foreign operating as stand-alone
markets business units in multiple
countries

Low High
Pressure for Local Responsiveness
Resources, Capabilities and Competitive Advantage

ABOVE
AVERAGE
INDUSTRY
PERFORMANCE

COMPETITIVE ADVANTAGE
Exceptional resources and capabilities

DISTINCTIVE COMPETENCY
Emotional resources and capabilities

CAPABILITIES
Ability to employ inputs

RESOURCES
Productive Inputs
 Path Leading to Competitive Advantage : Resource-
Based View
Non
Strategic
Capability Competitive
Advantage

No

Tangible and Capabilities

Intangible (What a firm
Distinctive Sustainable
Pa
Resources does and can do Are they
valuable Competency Competitive
(Stock of with its
Inputs) resources) Scarce Yes Advantage
Relevant

Yes
Non-
Is it Non-
sustainable
imitable, non-
Competitive
substitutable,
Advantage
non-transferable
No
 How Corporate-Level Strategy Evolves for a firm
Stays as a single-
business , single-

Concentrate
operations firm-
aggressively diversify
Strengthening the product line,
Profits geographically
expands or invest in
the current operations Lack of
to reduce cost and

Operations
synergy,
Single increase profits cultural
Concentr
product, conflict
ate,
Single Emerges as a shrinking Divest and
expand or
business vertically business restructure
diversify better
integrated single
business firm- alternatives
Expands

perform several to vertical

tightly integrated integration
value chain and
activities to diversificatio
Market enhance cost or ns assets
differentiation
Diversify

advantage.

Emerges as a multiproduct multi-business firm- focuses on several

related or unrelated products businesses, and value chin activities
consoles play stations. The aim is to achieve synergy among products,
business and functional activities, primary or support so as to increase
overall sales and profits without increasing cost.