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Business Unit Strategy Formulation of Business Unit Strategy in a turbulent environment March 2003 Examples and approach 108 rue Damrémont 75018 Paris.

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Presentation on theme: "Business Unit Strategy Formulation of Business Unit Strategy in a turbulent environment March 2003 Examples and approach 108 rue Damrémont 75018 Paris."— Presentation transcript:

1 Business Unit Strategy Formulation of Business Unit Strategy in a turbulent environment March 2003 Examples and approach 108 rue Damrémont 75018 Paris arestan@arestan.com

2 © 2003 Arestan Consulting 2 BU-Strategy(GB) What difference between Corporate Strategy and Business Unit Strategy? Corporate Strategy addresses the development of a vision and a large portfolio of activities of a Group, whereas Business Unit Strategy is mainly concerned with the process of creating a plan for a unit to enable it to achieve the potential it has targeted in its market Two critical aspects of the development of Business Unit (BU) Strategy are —Identification and communication to managers of the contribution the BU is making to the Group, and —The nature and the level of value created for the Group and for the unit through this ownership relationship.

3 © 2003 Arestan Consulting 3 BU-Strategy(GB) Special situations often introduce complexities which should be taken into account during the Business Unit Strategy development process The unit does not possess all the critical means for its development —Financial and human resources —Key competences The unit does not have a strategic autonomy in its activity scope or in certain segments of its market —Complex, often conflicting, relationships exist between the unit and other units of the Group in certain segments/markets The unit does not belong to the parent company ’s future core portfolio, but nevertheless it has to develop while awaiting an evolution of its ownership

4 © 2003 Arestan Consulting 4 BU-Strategy(GB) The following example demonstrates how an external assisstance over a short period sparked the transformation of a unit in difficulty The client —A transformation subsidiary of an industrial group —The subsidiary unit has  An industrial site in France  A subsidiary in the USA  A sales & marketing organization at the Headquarters in Paris  Supply agreements and sales force sharing arrangements with the parent company

5 © 2003 Arestan Consulting 5 BU-Strategy(GB) The General Manager was saying …. In spite of an internal strategy exercise, we still do not understand our positioning We know we have competitive handicaps in manufacturing and poor quality, and we are taking care of them, but —We do not understand how we can make any money in our target segments, even when we have upgraded our manufacturing facilities —Whereas, we think that our competitors do It seems obvious to us that there are strategic links between us and our parent company, but every time we look deep into them, we cannot describe them coherently and quantitatively We have to present our strategic plan to the Executive Committee soon, but we do not have the means nor the confidence to do it alone

6 © 2003 Arestan Consulting 6 BU-Strategy(GB) Key issues/objectives To develop a strategy that clarifies the position and the organization of the Business Unit for a turnaround and profitable growth —To develop a strategic understanding of key success factors and cost structures for each of the segments in the portfolio —To clearly identify the segments where a Group approach is a strength, and adjust the relationships for the others To share this vision with the Business Unit’s managers and the group’s executive committee

7 © 2003 Arestan Consulting 7 BU-Strategy(GB) A detailed and suported Strategic Plan in 9 weeks Strategic Diagnostics Strategic Orientations Strategic Orientations Finalization Competitive Analysis Competitive Analysis Evaluation of Intrinsic Profitability Of segments Evaluation of Intrinsic Profitability Of segments Portfolio diagnostics Identification of key questions Strategic Segmentation Strategic Segmentation Target portfolio BU – Group relationships BU – Group relationships Target Organizational structure Target Organizational structure Quantification of stakes Relations with the Group Implementation plan Impact on the organization 6 weeks2 weeks1 week

8 © 2003 Arestan Consulting 8 BU-Strategy(GB) An iterative process resulting in appropriation, and removing last minute surprises Steering Committee Member of the Executive Committee Project Team Client + Consultants Frequency As needed 4 meetings: 2 Diagnostics 2 meetings: 1 Diagnostics 2 Orientations 1 Orientations Missions Outcome Interviews with the personnel Analysis and synthesis Development of a market vision Preparation of the steering committee meetings Enrichment of the analyses Modification/validation of conclusions Review of the conclusions prior to presentation to the executive committee of the Group Enrichment of the conclusions through an « executive » filter A wide participation of the BU’s personnel within a controlled environment Various syntheses marrying strategic understanding and quantitative analysis Constructive discussions/ debates within the BU’s management committee Conclusions shared by BU’s management committee Pre-positioning of the topic with the Group’s executive committee

9 © 2003 Arestan Consulting 9 BU-Strategy(GB) At the end : A target portfolio clearly identified and positioned Dispersed Badly positioned Badly organized Group Strategy Group Strategy BU strategic autonomy BU strategic autonomy Stop Within the Group’s sphere of decision to identify, negotiate, conclude and organize (with the BU’s assistance) a global strategic alliance Reconfiguration of relations with the Group in raw material supplies and shared sales force Reorganization of sales and marketing activities to align them with the target segments’ strategic logics Definite and unequivocal stop of residual activities which were unlikely to develop Portfolio Strategy Portfolio before Understood Mastered New vision of the portfolio

10 © 2003 Arestan Consulting 10 BU-Strategy(GB) Advantages The client and the consultants combined their complementary strengths and competences to create this dynamics for change Client... Consultants... Project appropriation Detailed knowledge of the business Detailed knowledge of the business Access to the company’s Quantitative « memory » Access to the company’s Quantitative « memory » Project continuity Focus Objectivity Broad knowledge/ Benchmarks Broad knowledge/ Benchmarks Experience in managing change programs Access to all the necessary competences –Project management –Knowledge and methodologies –Benchmarks Facilitates rapid resolution of multi-disciplinary and multi- functional issues Optimized solutions Accelerated implementation Sustainability in time –Of the performance –Of the mind-set change

11 Appendix 1 A few methodologies in quantitative analysis

12 © 2003 Arestan Consulting 12 BU-Strategy(GB) Competitive Analysis Objective: To understand the company’s relative competitive position vis-à-vis its competitors in each segment Identification of the company’s strengths Relative position on key success factors Relative position on key accounts/clients Identification of the company’s strengths Relative position on key success factors Relative position on key accounts/clients Evaluation of the segment’s attractivity Size, growth rate, Intensity of the competition Entry barriers Risks / opportunities (substitution, new technologies) Profitability Evaluation of the segment’s attractivity Size, growth rate, Intensity of the competition Entry barriers Risks / opportunities (substitution, new technologies) Profitability Portfolio Diagnostics Attractivity/Strengths SWOT …... Portfolio Diagnostics Attractivity/Strengths SWOT …... Vision of the portfolio Identification of key questions

13 © 2003 Arestan Consulting 13 BU-Strategy(GB) Analysis of the intrinsic profitability of segments Objective: To understand the relative level of the profitability of the segments and the factors that impact our current performance Design of the relevant economic model to succeed on the segment Target Market Share Target Marketing mix : offer, price, presence, promotion Organization, headcount and costs for each stage in the value chain Profitability: EBITDA/Sales Design of the relevant economic model to succeed on the segment Target Market Share Target Marketing mix : offer, price, presence, promotion Organization, headcount and costs for each stage in the value chain Profitability: EBITDA/Sales Quantification of the company’s performance on each segment Market share, Sales Cost structure Profitability: EBITDA/Sales Quantification of the company’s performance on each segment Market share, Sales Cost structure Profitability: EBITDA/Sales Evaluation of the gap between the current performance and the intrinsic level Volume effect Mix/price effect Productivity effect Non-quality effect ….. Evaluation of the gap between the current performance and the intrinsic level Volume effect Mix/price effect Productivity effect Non-quality effect ….. Identification of key questions Identification of key questions

14 © 2003 Arestan Consulting 14 BU-Strategy(GB) Gap analysis Objective: To identify what we need extra to capture growth opportunities in the segment Identification of key growth factors for the segment The most critical stages of the value chain to manage for success The activities within the above mentioned stages that create the highest added value Thereof, identification of key growth factors Identification of key growth factors for the segment The most critical stages of the value chain to manage for success The activities within the above mentioned stages that create the highest added value Thereof, identification of key growth factors Evaluation with respect to the necessary levels "Capabilities" : HR, competences, structure, process, technologies, IS, assets Degree of difficulty to obtain them: financial, time, political, cultural Evaluation with respect to the necessary levels "Capabilities" : HR, competences, structure, process, technologies, IS, assets Degree of difficulty to obtain them: financial, time, political, cultural Evaluation of the level of accessibility of the opportunity for the company Identification of key questions

15 © 2003 Arestan Consulting 15 BU-Strategy(GB) Arestan Consulting StrategyInnovationOrganizational Effectiveness Create the environment to get the most from new ideas and intuition Build balanced corporate structures and processes (rigor, flexibility, adaptability) to enhance a company ’s new ventures and intrapreneurship initiatives Develop Strategic Business Designs and Models for new ventures Develop Business Plans for new activities and innovative start-ups Design structures and organizations for effective corporate governance Build effective management processes (capital allocation, human resource management, budgeting, strategy and portfolio planning) Design efficient and decision enabling reporting tools and processes Improve the productivity and effectiveness of Sales, Marketing and Customer Service functions Develop and implement successful outsourcing strategies To obtain more further information on Arestan Consulting, you can contact us 108, rue Damrémont orTel : +33 (0) 6 11 48 20 56 75018 Paris - France email: arestan@arestan.com Create a dynamic business portfolio to deliver value through asset productivity Develop and implement strategies to deliver profitable growth through leveraging the company ’s core competencies and assets Transform the Business Planning exercise into a powerful business development and evaluation process Enhance profits through innovative customer- focused value creating strategies Develop innovative channel strategies Develop and implement customer driven key account management strategies Arestan Consulting works with executives and management teams on the development of their organizations’ future. Our collaborative approach is focused on the following expertise:


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