PRODUCTION MANAGEMENT

PRODUCTION MANAGEMENT
STRATEGIC MANAGEMENT Jan Skonieczny

Introduction to Strategic Management

Development phases of strategic management
MAIN PROBLEM PATTERN OF SOLUTION Managing high skilled staff 1990 ? Matching to environment 1980 Strategic management Strategic orientation 1970 Strategy / Strategic plans Market demands 1960 Marketing / Sales Presence vs. future 1955 Controlling / Organizational planning Cost orientation 1950 Cost accounting / Economic Quantity approach Rationalization / Organization Source: [M. Moszkowicz, 2000, p. 27]

Evolution of strategic management
Source: S. Hollensen, 2003

Strategic Management Source: H. Ansoff, 1984 Attribute
Industrial ( s) Post-Industrial (1950s- ) Boundary of environment Around commercial activity of the organisation Stable Well-defined Non-permeable Few different types of actors Environment segmented into industries Influences among actors laterally direct Firm the center of power Common shares knowledge Includes commercial socio- political activity Changing Value Permeable to new influences Many different types of actors Industry lines indistinct Direct and indirect influences Centers of power in political bodies Many foci of privileged knowledge Source: H. Ansoff, 1984

Strategic Management Source: H. Ansoff, 1984 Dynamics of environment
Environmental change generated by the organisation Few surprises Technology, markets, continuously evolving Occasional discontinuities Prior experience applicable to new situations Change generated both inside organisation and outside environment by many sources Many surprises Discontinuous changes frequent in market structure, technology, government relations. Prior experience inapplicable to new situations Source: H. Ansoff, 1984

Characteristics of strategic management and operational management

Definition of strategic management
Strategic management is a total management concept, which in the face of a turbulent environment is able to creative adaptation. This concept defends negative outside trends and creates effective competitive advantages, which enable the realization of an enterprise's aims Source: [M. Moszkowicz, 2005]

Levels and strategic areas at general models of strategy
CORPORATE STRATEGY Problems: a)Choosing pattern of relation with environment b)Choosing activity area and configuration the strategic business units c)Separate resources for selected strategic business units STRATEGIC FUNCTIONAL AREA Problems: Detailing strategy for all strategic functional areas Financial R+D Top management other Marketing Production SBU C STRATEGIC BUSINESS UNITS (SBU) (strategy – business strategy) Problems: How to win competition on SBU’s market area SBU B SBU A Source: [M. Moszkowicz 2005]

Criteria of selecting strategic business units
1. SBU has its own clients 2. SBU has its own competitors 3. Decisions independence 4. Separated finance - can be calculated as centre of incomes dna costs 5. Sometimes  Investment independence Source: [M. Moszkowicz, 2005]

Three levels of strategy Corporate Strategy part 1
Strategy level Decisions covered Examples of application at Unilever Corporate · Purpose · Direction · Long-range goals · Business definition · Value creation for Customers · To achieve sustainable, profitable growth and create long-term value for consumers, shareholders, employees Growth 5-6% annual growth Consumer goods Brand-name, quality products that meet and anticipate everyday customer needs · ·

Three levels of strategy Business strategy part 2
Business (implementing corporate strategy) · Unit scope · Competitive approach · Markets served · Allocation of resources for value · Foods, home and personal care divisions · Leverage brands for market leadership in high-demand product categories Build relationships with consumers in Europe, Asia, the Americas, other markets Emphasise research and development to meet emerging consumer needs

Three levels of strategy Functional strategy part 3
Marketing (implementing business strategy, supporting corporate strategy) · Product strategy · Pricing strategy · Channel/logistics (distribution) strategy · Integrated marketing communication (promotion) strategy · Service · Internal marketing · Reinforce brand names in chosen categories (such as Magnum ice cream, Knorr soup) Offer quality and value · Reach consumers through food wholesalers, retailers, restaurants, hotels · Build brands through media advertising, online presence and various other techniques · Fill channel orders completely, on time · Build commitment and cooperation for marketing through ongoing communication and meetings. Source: M. Wood, 2004

Information Need Categories for a Business or Business Unit

Main differences between the resource-based view and the market orientation view part 1
Market orientation view (MOV) Resource-based view (RBV) Basic principle Adapt firm’s resources to the requirements of its competitive environment, i.e. to key success factors Pro-active quest for environments that allow the best exploitation of the firm’s resources Strategic analysis Centred on infustry structure and market attributes Emphasis on internal diagnosis Formulation process Outside-in Inside-out Source competitive edge Market positioning in relation to local competitive environment Firm’s idiosyncratic set of resources and competences

Examples: Lipparini and Fratocchi (1999) Tetra Pak The Swedish company Tetra Pak develops, manufactures and markets complete packaging system for liquid and semi-liquid foods as well as equipment required for their distribution. The Tetra Pak architecture is derived form, and based on, relationships. The relational aspects that the company considered when it set up a production activity in a given country mainly concerned customer companies or governments. Even today, Tetra Pak seeks to become part of local culture, rapidly acquiring a network identity which is the direct result of its relational capability. Ikea Ikea, the world’s biggest home furniture manufacturer, is an example of how value can be created by renouncing a number of activities in the value chain and focusing on its own resources/competences and on relations with customers and suppliers. The Ikea formula comprises high quality design, a global sourcing system, products that the customers take home and assemble, and sales outlets that are also entertainment and service points.

Market-orientation leads to location of production activities where the need for a given product arises, for example, the creation of a paper-processing facility in Brazil after verifying the demand for its packaging systems at potential customers, e.g. producers of liquid foods. Its customers in Brazil would like to be close to the Tetra Pak processing plant because the logistics function is a critical factor in continuity of supplies, given that the customers must necessarily use Tetra Pak material for their machines. IT links with its packaging material stocks enable Tetra Pak to predict the re-order point and adjust production of the nearest paper-processing facility. cost savings generated by outsourcing activities like assembly and delivery allow the company to charge lower prices than its competitors. The company has approximately 2000 suppliers in over 50 countries, and 30 purchasing centres worldwide have the task of seeking out suppliers able to fit into its value system with good-quality, low-cost products. The final decision is taken by designers in Sweden, where Ikea’s operational HQ is located. Suitable computerized international coordination and support structures help suppliers source raw materials on the best terms. See also Figure 2.6 for an illustration of IKEA’s business system. Source: S. Hollensen, 2003, p. 39

The resouce-based view versus market

Product-Oriented Versus Market-Oriented Definitions of a Business

The leading edge of strategy- fit or stretch

Main elements of strategic management

The Strategic Planning. Implementation, and Control Process

The corporate Strategic-Planning Process

The Business Strategic-Planning Process

Organisation Mission & Objectives

The vocabulary of strategy

British Airways and the vocabulary of strategy

Identity – Mix Corporate Personality Corporate Behavior
Corporate Disign Corporate Communication Understanding the enterprise status, its aims, economical and social function. The most important enterprise dimension is estimated by its behavior. A Trade mark building shape and graphical form of documents. Flexible identity forming in short and medium periods Source: [M. Moszkowicz, 2005]

Elements of organizational culture
System of organization essentials – needs, attitudes, preferences Organizational norms – legal or rules Style of management Myths Customs and behavior rituals – focused on clients Organizational language – verbal communication Source: [M. Moszkowicz, 2005]

Enterprise communications
IDENTITY PERSONALITY Philosophy Culture Mission statement IMAGE REPUTATION Reputation Source: [M. Moszkowicz, 2005]

Definition of mission statement
Mission statement is a synthesis – in an environment reality – a business concept M. Moszkowicz, 2005

Examples of mission statement
Democratize the computer – APPLE Speed and cheap – McDonald’s Comfortable attendance of clients - Mariott Fulfill the customers’ needs of electricity and heat energy – energy sector firm We supply heat energy to customers’ houses – energy sector firm Source: [M. Moszkowicz, 2005]

Definition of Business along Three Dimensions; Full Function, Broad Scope, and Computer Manufacturer Utilizing Existing Technology Source: S. Abell

Definition of Business along Three Dimensions; Full Function, Limited Customer Group, and Computer Manufacturer Utilizing Existing Technology Source: S. Abell

Definition of Business along Three Dimensions; Full Function, Limited Customer, and Computer Manufacturer Utilizing Existing Technology Source: S. Abell

Definition of Business along Three Dimensions; Limited Function, Broad Scope, and Peripheral Manufacturer Utilizing Existing Technology Source: D. Abell

Definition of Business along Three Dimensions; Limited Function, Limited Customer Group, and Peripheral Manufacturer Utilizing Existing Technology Source: S. Abell

Targed Definition of Business

Financial objectives part 1
Focus of financial objective Purpose and examples External results To provide targets for outcomes of marketing activities such as: Increasing unit or monetary sales by geographic market Increasing unit or monetary sales by customer segment Increasing unit or monetary sales by product Increasing unit or monetary sales by channel Other objectives Source: M. Wood, 2004

Financial objectives part 2
Internal requirements To provide targets for managing marketing to meet organisational requirements such as: Achieving breakeven status Achieving profiability levels Achieving return on investment levels Other objectives Source: M. Wood, 2004

Marketing objectives Source: M. Wood , 2004
Focus of marketing objective Purpose and examples External relationships To provide targets for managing relations with customers and other stakeholders such as: Enhancing brand, product, company image Building brand awareness and preference Stimulating product trial Acquiring new customers Retaining existing customers Increasing customer satisfaction Acquiring of defending market share Expanding or defending distribution Other relationship objectives Internal activities To provide targets for managing specific marketing activities such as: Increasing output or speed of new product development Improving product quality Streamlining order fulfilment Managing resources to enter new markets or segments Conducting marketing research Other objectives Source: M. Wood , 2004

Marketing In Practise: Proceter & Gamble
Proceter & Gamble’s Pampers brand has long battled its arch-rival Kimberly-Clark’s Huggies brand for a share of the US nappy market. In monetary terms, Huggies is the share leader, holding nearly 45 per cent of the US market. A few years ago, when Pamper’s market share was hovering under 35 per cent and overall market growth seemes limited, its marketers decided on more aggressive share objectives. At the time, Kimberly-Clark was reducing the number of nappies in each Huggies pack-age – and lowering prices slightly – to stimulate sales and profits. Pampers’ marketers cut pries but not the number of nappies per package and in pursuit of higher market share, began emphasising this adventage in splashy new promotions. They intensified the pressure even further by increasing the value of discount coupons and adding the word ‘Compare’ to Pampers packages. The plan worked: Pampers gained market share even as Huggies lost some ground. The following year, with financial objectives in mind, Pampers’ marketers followed Kimberly-Clark’s lead and reduced the number of nappies per package. Source: M. Wood, 2004

Societal objectives part 1
Forces of societal objective Purpose and examples Ecological protection To provide targets for managing marketing related to ecological protection and sustainability: Reducing pollution with natural or ‘greener’ products, ecologically friendly processes Doing business with ‘greener’ supplier’s and channel members Reducing waste by redesigning products and processes for recycling, other efficiencies Conserving use of natural resources Other objectives Source: M. Wood, 2004

Societal objectives part 2
Social responsibility and stakeholder relations To provide targets for managing marketing related to social responsibility and stakeholder relations: Building a positive image as a good corporate citizen Sopporting designated charities, community projects, human rights groups and other, with money and marketing Encouraging volunteering among employees, customers, suppliers, channel members Communicating with stakeholders to understand their concers and explain societal activities Other objectives Source: M. Wood, 2004

Business Mission Statements
James River Corporation Humana, Inc. General Electric Company McDonald's Corporation Carson Pirie Scott & Company

Humana, Inc. The mission of Humana is to achieve an unequaled level of measurable quality and productivity in the delivery of health services that are responsive to the needs and values of patients, physicians, employers, and employees. Our strategy is twofold: We insit upon excellence and productivity, and we are creating an integrated health care system while exploring new services that address the needs and values of our customers. Source: H. Bartlett H.C. Barlett, 1988

General Electric Company
General Electric has identified 15 major businesses that are leaders in their markets today and that represent GE’s best opportunities to remain a world leader in the 1900s. we have grouped these businesses into three circles-core, high technology, and services-and surrounded them with three support operations that are helping our 15 major businesses in their drive for continuing world leadership. Source: H. C. Bartlett, 1988

McDonald’s Corporation
McDonald’s Corporation is the largest foodservice organization in the world. The Company, its franchisees and affiliates operate more then 7,200 McDonald’s restaurants, each serving a limited menu of high-quality moderately priced food. The restaurants are located in all 50 of the United States, the District of Columbia, and internationally in 30 other countries and territories. In its 28-year history, the Company has pioneered foodservice technology, marketing techniques, and operational systems that are now the standards of its industry. The McDonald’s motto of Q.S.C.&V. translates into Quality food product; efficient, friendly Service; and restaurants renowned for the Cleanliness and Value they provide. Q.S.C.&V…. McDonald’s promise to people around the world. Source: H.C. Bartlett, 1988

James River Corporation
James River Corporation, headquartered on the banks of the James River in Richmond, Virginia. Is a major integrated manufacturer and converter of paper and paper-related products, including pulp, and a manufacturer of certain plastic products and coated film. Through its subsidiaries, the Company processes basic raw materials-wood, wood pulp, synthetic fibers and plastic resins-into finished products such as towel and tissue papers, disposable food and beverage service items and folding cartons, as well as a wide array of communication papers and specialty industrial and packaging papers. During its 17-year story history, the Company has pursued an acquisition and operating strategy which has significantly expanded its business and the diversity of its products. As of April 27, 1986, James River had 23,000 employees working in 75 manufacturing facilities located in 24 states, Canada, and the United Kingdom. With the subsequent acquisitions of Crown Zellerbach, Canada Cup and Handi-Kup, The Company today is made up of 36,00 employees in 111 manufacturing facilities in 28 states, Canada, and the United Kingdom. Source: H. C. Bartlett, 1988

Carson Pirie Scott & Company
Through innovative management and highly motivated employees, we will achieve leadership in service and financial results. Emphasis will be placed on customer satisfaction in the retailing, food service, lodging, and distribution fields. Source: H.C. Bartlett, 1988

Strategies Objectives
General Motors Corporation Carson Pirie Scott & Company Kemper Group

General Motors Corporation
Retain leadership in the worldwide automobile industry by producing high-quality, high-value products in the variety that customers demand. Remain a significant force in related key industries Continue as a high-technology enterprise sustaining a competitive edge into the 21st century. Assure stockholders an attractive return as a basic of their continuing support of GM’s progress and objectives. Source: H.C. Bartlett, 1988

Carson Pirie Scott & Company
Achieve by 1988 a 16 percent return on equity, sales of $1.7 billion, and a strong balance sheet. Achieve customer satisfaction by providing quality products and services at a fair price. Provide our employees with a work environment that encourages their involvement and participation, and also is conducive to greater productivity. To be a responsible member of the communities in which we do business. Source: H.C. Bartlett, 1988

Kemper Group To provide insurance and financial services and products that are responsive to the needs of present and prospective customers and are competitive in price. Over any five-year period, to achieve an increase in after-tax earnings greater then the average of our principal competitors, while at the same time increasing our share of market. To invest assets at the highest net return consistent with maintaining financial resources sufficient to meet our obligations under all foreseeable circumstances. To conduct all of your activities in an ethical, lawful and responsible manner. Source: H.C. Bartlett, 1988

Some guidelines for establishing strategic objectives in organizations
Some guidelines for establishing strategic objectives in organizations. These are outlined below: Strategic objectives should strongly correlate with and facilitate the attainment of business mission. 2. Strategic objectives should be compatible with the philosophy and culture of the business 3. Strategic objectives should be aggressive but attainable over a period of time. Objectives or goals that are either too high or too low will not motivate individuals. Ideally, strategic objectives should require work and imagination to attain them.

4. Strategic objectives should be determined through discussion and negotiation among individuals at various levels of the organization. 5. Strategic objectives should be understood by all members of the organization, especially those who have to lead that organization toward the attainment of those objectives. 6. Strategic objectives should become more specific as they are developed into operational objectives and goals at the operating levels of the organization. They should be measurable and quantifiable wherever possible. Target dates for attainment should be specified. 7. Strategic objectives should conform to ethical and social codes accepted by society and the business. Source: J. Pearce & R. Robinson

Maslow's Hierarchy of Needs

External/ Environmental Analysis

Functional analyze of enterprise
MARKETING FUNCTION Market share Product concept Set (combination) of product Products quality Price of product PERSONAL FUNCTION Staff fluctuation Staff recruitment Motivation system FINACIAL FUNCTION Net profits Level of debts Level of investment capitals PRODUCTION AND LOGISTIC FUNCTION Production capacity Limitations of production Production costs Automatisation INNOVATIVE FUNCTION Type and scope of leading researches Technology (modern or not modern) Capacity for leading research MANAGMENT QUALITY CONTROL Efficiency of strategic management Efficiency of information system Efficiency of cost analysis Source: [J. Skonieczny, 2005] 59

Estimation the enterprise resources
Criteria Estimation 1 2 3 4 5 6 7 Proftability Credit ability Technical conditions of buildings Motivation systems Interpersonal relations Organizational structure Quality standards Source: [P. Kubiński, 2005]

Idea of core competencies
Products STRATEGIC BUSINESS UNIT 1 STRATEGIC BUSINESS UNIT 2 STRATEGIC BUSINESS UNIT 3 STRATEGIC BUSINESS UNIT 4 Core competence 1 Core competence 2 Source: [P. Kubiński, 2005]

From resources to core competitions
Selected resources Competencies of competitive advantage Contracts License Trade secrets Intellectual properties Trade marks Patents Legal Elements and attributes of final product Data base Products fame (renown) Enterprise reputation Relations Configuration of value chain Distribution system Positional Know-how: Staff Suppliers Distributors Functional Attitude to: Quality Service Capacity for management of change Capacity for innovation Capacity for team work Cultural Source: [M. Moszkowicz, 2005]

Selected methods of environment analysis
Macroenvironment analysis Task (sector) environment Experts opinion Trends extrapolation Scenarios Simulation models Brainstorm Strategic gap analysis Five forces analysis Pointing analysis of a sector Strategic group map Experience curve Source: [J. Skonieczny, A. Świda, 2005]

Scenario methods Scenario methods – Stimulate a firm’s management to forecast different events and their influences on an organization. Main four types of scenarios: Scenarios of probable events – Creating a list of possible future events which could be important for an organization. Simulation scenarios – Estimation of potential strategic choices and their future environment relations. Scenarios of environment conditions – Estimation of a potential influence of separated environment elements on an enterprise and its probability to happen. Scenarios of environment tendencies (processes) – Focused on most important tendencies which can strongly impact on an enterprise. Source: [A. Świda, 2005]

Analyze of strategic gap
Strategic gap analysis – Process of estimating existing strategy and organizing a business model for future environment requirements. That gap analysis creates ways to equal differences among organizational targets and expectations. Operational gap – Weak utilization (usage) of firm’s resources performance. Strategic gap analysis – Diagnostic methods which can estimate organizational adaptive skills to environment trends. Source: [M. Moszkowicz, 2005]

Selected methods of environment analysis
Macro environment analysis Task (sector) environment Experts opinion Trends extrapolation Scenarios Simulation models Brainstorm Strategic gap analysis Five forces analysis Pointing analysis of a sector Strategic group map Experience curve Source: [J. Skonieczny, A. Świda, 2005]

Methods of Environmental Forecasting
1.Expert opinion 2.Trend extrapolation 3.Trend correlation 4.Dynamic modeling 5.Cross-impact analysis 6.Multiple scenarios 7.Demand/hazard forecasting Source: J. Bright&M. Schoeman.

Environment analysis and stakeholders analysis
Segmentation: General environment segmentation Analysis of strategic interest group Economy Demography Society FIRM Technology Politics and legal area STAKEHOLDER ANALYSIS Source: [J. Skonieczny, 2005]

Stakeholders groups at enterprise environment
Groups that poses low influence on enterprise Groups that poses high influence on enterprise Groups strongly interested in enterprise Active spectators Gamblers (speculators) Groups weakly interested in enterprise activities Mob Arbiters Source: [J. Skonieczny, 2005]

Expert opinion.Knowledgeable people are selected and asked to assign importance and probability ratings to various possible future developments. The most refined version, the Delphi method, puts experts through several rounds of event assessment, where the keep refining their assumptions and judgments. Source: S.C. Certo & J.P. Peter, 1988, s. 50

2. Trend extrapolation. Researchers fit best-fitting curves (linear, quadratic, or S-shaped growth curves) through past time series to serve as a basis for extrapolation. This method can be very unreliable in that new developments can completely alter the expected direction of movement Source: Source: S.C. Certo & J.P. Peter, 1988, s. 50

3. Trend correlation. Researchers correlate various time series in the hope of identifying leading and lagging relationships that can be used for forecasting. Source: S.C. Certo & J.P. Peter, 1988, s. 50

4. Dynamic modeling. Researchers build sets of equations that attempt to describe the underlying system. The coefficients in the equations are fitted through statistical means. Econometric models of more than three hundred equations, for example, are used to forecast changes un the U.S. economy Source: Source: S.C. Certo & J.P. Peter, 1988, s. 50

5.Cross-impact analysis. Researchers identify a set of key trends (those high in importance and/or probability). The question is then put: “If sent A occurs, what will be the impact on all other trends?” The results are then used to build sets of “domino chains,” with one event triggering others Source: J. Bright&M. Schoeman.

6.Multiple scenarios. Researchers build pictures of alternative futures, each internally consistent and with a certain probability of happening. The major purpose of the scenarios is to stimulate contingency planning. Source: J. Bright&M. Schoeman.

7. Demand/hazard forecasting. Researchers identify major events that would greatly affect the firm. Each event is rated for its convergence with several major trends taking place in society and for its appeal to each major public group in the society. The higher the event’s convergence and appeal, the higher its probability of occurring. The highnest-scoring events are then researched further Source: S.C. Certo & J.P. Peter, 1988, s. 50

Types of Competition and Expected Firm Performance
Type of Competition Attributes Examples Expected Firm Performance Perfect competition Large number of firms Homogeneous product Low-cost entry and exit Stock market Crude oil Competitive Parity Source: J. Barney & W. Hesterly, 2006

Monopolistic Competition Large number of firms Heteroge-neous products Low-cost entry and exit Toothpaste Shampoo Golf balls Automobiles Competitive Advantage Oligopoly Small number of firms Homogeneus products Costly entry and exit U.S steel and autos in the 1950s U.S. breakfast cereal Monopoly One firm Costly entry Home mail delivery Source: J. Barney & W. Hesterly, 2006

Major trends of an environment
Growth of the novelty of change. They important events which affect the organisation is progressively disconnected from past experience. We have discussed this phenomenon in detail in the preceding pages; Growth in the intensity of the environment. The maintenance of linkages between the organisation and its correspondents consumes a growing percentage of energy, resources, and managerial attention. We shall devote the following chapter to analysis of strategic intensity; Source: H. Ansoff, 1984

Major trends of an environment
Increase in the speed of environmental change; Growing complexity of the environment. Source: H. Ansoff, 1984

Components of Environmental Analysis
Source: D. Aaker

Defining the 'public' Source: M. Wood, 2004

Different degrees of product newness

Some important variables in the international Societal environment

The planning gap Source: S. Hollensen, 2003

The Strategic-Planning Gap

External Analysis Source: S. Certo & J. Peter, 1988 Opportunities
Threats Enter new markets or segments? Add to product line? Diversity into related products? Add complementary products? Vertical integration? Ability to move to better strategic group? Complacency among rival firms? Faster market growth? Other? Likely entry of new competitors? Rising sales of substitute products? Slower market growth? Adverse government policies? Growing competitive pressures? Vulnerability to recession and business cycle? Growing bargaining power of customers or suppliers? Changing buyer needs and tastes? Adverse demographic chages? Source: S. Certo & J. Peter, 1988

Strategic Groups in the Major Appliance Industry

Components of Environmental Analysis

Internal/ Ressources Analysis

Type of Competition Attributes Examples Expected Firm Performance Perfect competition Large number of firms Homogeneous product Low-cost entry and exit Stock market Crude oil Competitive Parity Source: J. Barney & W. Hesterly, 2006

Monopolistic Competition Large number of firms Heteroge-neous products Low-cost entry and exit Toothpaste Shampoo Golf balls Automobiles Competitive Advantage Oligopoly Small number of firms Homoge-neous products Costly entry and exit U.S steel and autos in the 1950s U.S. breakfast cereal Monopoly One firm Costly entry Home mail delivery Source: J. Barney & W. Hesterly, 2006

A simplified version of the value chain

BCG's Growth-Share Matrix
Source: S. Certo, J. Peter, 1988

Cash generation in the BCG matrix

Compiling the GE matrix and making conclusions based on it
Compiling the GE matrix and making conclusions based on it. Step 2 Estimate position SBUs in the GE matrix Source: S. Hollensen, 2003

Compiling the GE matrix and making conclusions based on it. Step 3 Strategic implications of SBU positions Source: S. Hollensen, 2003

Core Competencies for the Example of Honca - Roots are underlying skills and capabilities that represent core competencies Source:J. Mohr, S. Sengupta, S. Slater, 2005

Experience curves in different functions picture A

Experience curves in different functions picture B

GE's Multifactor Portfolio Matrix
Source: S. Certo, J. Peter, 1988

Gillette's international market country portfolio

Marketing Planning, principles into practice
Source: M. Wood, 2004

Model for development of core competences

Push and pull strategies in the car industry value chain

The business system of Ikea

The Product Life Cycle, Innovation, and the Role of Alliances
Source: J. Mohr, S. Sengupta, S. Slater, 2005

Timing and Impact of Management Attention and Influence
Source: R. Burgelman, M. Maidique, S. Wheelwright, 1995

Vickers Map of Competencies

Core Competencies at Canon part 1
Precision mechanics Fine optics Microelectronics Basic camera Compact fashion camera Electronic camera EOS autofocus camera Video still camera Source: G. Hammel, C.K. Prahalad, 1999

Laser beam printer Color video printer Bubble jet printer Basic fax Laser fax Calculator Plain paper copier Source: G. Hammel, C.K. Prahalad, 1999

Battery PPC Color copier Laser copier Color laser copier Navi Still video system Source: G. Hammel, C.K. Prahalad, 1999

Laser imager Cell analyzer Mask aligners Stepper sligners Excimer laser aligners Source: G. Hammel, C.K. Prahalad, 1999

Internal Analysis Source: S. Certo & J. Peter, 1988 Strengths
Weaknesses A distinctive competence? Adequate financial resources? Good competitive skills? Well thought of by buyers? An acknowledged market leader? Well-conceived functional area strategies? Access to economies of scale? Insulated (at least somewhat) form strong competitive pressures? Proprietary technology? Cost advantages? Competitive advantages? Product innovation abilities? Proven management? Other? No clear strategic direction? A deteriorating competitive position? Obsolete facilities? Subpar profitability because…? Lack of managerial depth and talent? Missing any key skills or competences? Poor track record in implementing strategy? Plagued with internal operating problems? Vulnerable to competitive pressures? Falling behind in R&D? Too narrow a product line? Weak market image? Competitive disadvantages? Below-average marketing skills? Unable to finance needed changes in strategy? Source: S. Certo & J. Peter, 1988

Identifing key competences at Daimler-Benz
The case of Daimler-Benz provides a good example of the management of technological competences. This internal process takes two to three months, and involves the group’s senior management. External consultants corroborate the internal analysis and futher develop the opinions gathered from the business units. The process is summarized in the nine main phases shown in Tabale 2. Source: S. Hollensen, 2003

Stages in identification of key competences at Daimler-Benz
Products, clients and markets Key factor of success (KFS) Future market trends and the evolution of KFS Indentification of areas of key competences Initial formulation of key competences Mult-kriteria checking Fine-tirning and honing of these critical competences Needs analysis in terms of the key competences Study of competences other than key competences that should be retained Source: S. Hollensen, 2003, p.51

Step 1: Determining the factors (only shown for hydraulic pumps) Step 2: Estimate position of SBUs inthe GE matrix Step 3: Strategic Implication of SBU positions

The SBU only, e.g . Weight x Rating = Score/value
Hydraulic pumps (1-5) Market Overall market size attractiveness Annua market growth rate Historical profit margin Competitive intensity Technological requirements Inflationary vulnerability Energy requirements Environmental impact Total

SOURCE: S. Hollensen, 2003 Weight x Rating = Score/value
Business Market share strenght Share growth Product quality Brand reputation Distribution network Promotional effectiveness Productive capacity Productive efficiency Unit costs Material supplies R&D performance Managerial personnel Total SOURCE: S. Hollensen, 2003

Market Attractiveness - Competitive-Position Portfolio Classification and Strategies

Factors contributing to market attractiveness and competitive position
Attractiveness of your market Competitive position of your business (business strengths) Market factors Size (value, units or both) Size of key segments Growth rate per year: -total -segments Diversity of market Sensitivity to price, service features and external factors Cyclically Seasonality Bargaining power of upstream suppliers Bargaining power of downstream suppliers Your share (in equivalent terms) Your share of key segments Your annual growth rate: Diversity of your participation Your influence on the market Lags or leads Bargaining power of your suppliers Bargaining power of your customers

Financial and economic factors
Competition Types of competitor Degree of concentration Changes in type and mix Entries to and exits from market segment Changes in share Substitution by new technology Degrees and types of integration Where you fit, how you compare in terms of product, marketing capability Service, production strength, financial strength, management Segments you have entered or left Your relative share change Your vulnerability to new technology Your own level of integration Financial and economic factors Contribution margins Leveraging factors, such as economies of scale and experience Barriers to entry or exit (both financial and non financial) Capacity utilization Your margins Your scale and experience Barriers to your entry or exit (both financial and non financial) Your capacity utilization

Technological factors
Maturity and volatility Complexity Differentiation Patent and copyrights Manufacturing process technology required Your ability to cope with change How strong your skills are Types of your technological skills Your patent protection Your manufacturing technology Socio-political factors in your environment Social attitudes and trends Law and government agency regulations Influence with pressure groups and government representatives Human factors, such as unionization and community acceptance Your company’s responsiveness ad flexibility Your company’s ability to cope Your company’s aggressiveness Your company’s relationships Source: S. Hollensen, 2003

The Value Chan and Competitive Advantage
Source: M. Porter, 2006

The Boston Consulting Group's Growth-Share Matrix

Business Position-Industry Attractiveness Matrix

The Break-Even Time Metric

Model of Organisation Analysis

The Value Chain

SWOT Analysis

Important Considerations for SWOT Analysis
Internal Analysis External Analysis

Internal Analysis Source: S. Certo & J. Peter, 1988 Strengths
Weaknesses A distinctive competence? Adequate financial resources? Good competitive skills? Well thought of by buyers? An acknowledged market leader? Well-conceived functional area strategies? Access to economies of scale? Insulated (at least somewhat) form strong competitive pressures? Proprietary technology? Cost advantages? Competitive advantages? Product innovation abilities? Proven management? Other? No clear strategic direction? A deteriorating competitive position? Obsolete facilities? Subpar profitability because…? Lack of managerial depth and talent? Missing any key skills or competences? Poor track record in implementing strategy? Plagued with internal operating problems? Vulnerable to competitive pressures? Falling behind in R&D? Too narrow a product line? Weak market image? Competitive disadventages? Below-average marketing skills? Unable to finance needed changes in strategy? Source: S. Certo & J. Peter, 1988

External Analysis Source: S. Certo & J. Peter, 1988 Opportunities
Threats Enter new markets or segments? Add to product line? Diversity into related products? Add complementary products? Vertical integration? Ability to move to better strategic group? Complacency among rival firms? Faster market growth? Other? Likely entry of new competitors? Rising sales of substitute products? Slower market growth? Adverse government policies? Growing competitive pressures? Vulnerability to recession and business cycle? Growing bargaining power of customers or suppliers? Changing buyer needs and tastes? Adverse demographic changes? Source: S. Certo & J. Peter, 1988

The Business Strategic-Planning Process

Oportunity Matrix

Threat Matrix

Strengths and Weaknesses Analysis

Generic Strategies

Characteristics of costs strategy
Cost strategy Classical enterprise strategy. Success factor - low cost (price). The strategy needs absorptive market. Typical requirements – big scale of production standard products, specialized technology. Doesn't ”work” in ”saturated” market . Source: [M. Moszkowicz, 2005]

Characteristics of differentiation strategy
Totally opposite to cost strategy. In general - to achieve features which differentiate products form others. Typical factors of differentiation  color, shape, trade mark, distributions. The strategy ”works” at saturated markets. The differentiation features should be highly-estimated by clients. Source: [M. Moszkowicz, 2005]

Strategies of SBU level. Model created by H. G. Steinmann and G
Strategies of SBU level. Model created by H.G. Steinmann and G. Schreyoegg 7 5 8 Costs 3 4 Main direction of competition 6 Change 1 2 Competition rules Differentiation Adaptation Market Whole segment Competition market area Source: [H.G. Steinmann, G. Schreyoegg, 2001]

Strategies of SBU level. Model created by M
Strategies of SBU level. Model created by M. Moszkowicz (Moszkowicz cube) 4 3 7 Economics of scope 2 6 Variables of efficiency transformation 8 Towards client Economics of scale 1 5 Market orientation Towards needs Production Market Coordination the adaptable activities 1 – cost strategy 2 – strategy of technological niche 3 – strategy of computer integrated manufacturing 4 – product diversification strategy 5 – mass marketing strategy 6 – strategy of market niche 7 – products differentiation strategy 8 – strategy of focused marketing Source: [M. Moszkowicz, 2005]

Corporate strategy – model of M. Moszkowicz
7 5 8 External 3 4 Type of development 6 Passive 1 2 Relation to uncertainty Internal Active One Many market Area of markets activity 1. Penetration strategy Monopolization strategy 2. Internationalization strategy Diversification strategy 3. Integration strategy Acquisition strategy 4. Enterprising strategy Globalization strategy Source: [M. Moszkowicz, 2005]

Ways Firms Can Differentiate Their Products
To differentiate their products, firms can focus directly on the attributes of it products or services , or 1. Product features 2. Product complexity 3. Timing of product introduction 4. Location on relationships between itself and its customers, or 5. Product customization 6. Consumer marketing 7. Product reputation on linkages within or between firms 8. Linkages among functions within a firm 9. Linkages with other firms 10. Product mix 11. Distribution channels 12. Service and support Source: J. Barney & W. Hesterly, 2006

Creating the Mix of Product Process Development Projects

Generic strategies Source: S. Hollensen, 2003

Market definition Source: M. Wood, 2004

The Ansoff product-market strategy

The Microsoft-Lego alliance

The Nine Strategies to entry a Global Market

The three levels of a product

Major motives for starting export
Pro-active motives Reactive motives Profit and growth goals Managerial urge Technology competence/unique product Foreign market opportunities/market information Economies of scale Tax benefits Competitive pressures Domestic market: small and saturated Overproduction/excess capacity Unsolicited foreign orders Extended sales of seasonal products Proximity to international customers/psychological distance Source: S. Hollensen, 2003

Risks of the Generic Strategies

Source: M. Porter, RISKS OF COST LEADERSHIP
Cost leadership is not sustained competitors imitate technology changes other bases for cost leadership erode RISKS OF DIFFERENTIATION Differentiation is not sustained bases for differentiation become less important to buyers RISKS OF FOCUS The focus strategy is imitated The target segment becomes structurally unattractive structure erodes demand disappears Proximity in differentiation is lost Cost proximity is lost Broadly-targeted competitors overwhelm the segment the segment’s differences from other segments narrow the advantages of a broad line increase Cost focusers achieve even lower cost in segments Differentiation focusers achieve even greater differentiation in segments New focusers sub-segment the industry Source: M. Porter,

Product and Process Technology and the Generic Strategies

Source: M. Porter COST LEADERSHIP DIFFERENTIATION COST FOCUS
COST LEADERSHIP DIFFERENTIATION COST FOCUS DIFFERENTIATION FOCUS Product Technological Change Product development to reduce product cost by lowering material content, facilitating ease of manufacture, simplify logistical requirements, etc. Illustrative Technology - Product development to enhance product quality, features, deliverability, or switching costs Technolo-gical Policies Product development to design in only enough performance for the target segment’s needs Product design to meet the needs of a particular segment better than broadly-targeted competitors Process Technological Change Learning curve process improvement to reduce material usage or lower labor input Process development to enhance econo- Mies of scale Process development to support high tolerances, greater quality control, more reliable scheduling, faster response time to orders, and other dimensions that raise buyer value Process development to tune the value chain to a segment’s needs in order to lower the cost of serving the segement Process development to tune the value chain to a segment needs in order to raise buyer value Source: M. Porter

Model of organization developement

Understanding strategy development

Strategic direction from prior decisions

Specific Strategies for Business and Conditions Under Which Each Might Be Applicable
Market Share Building Market Share Holding Market Share Harvesting Divestiture Licquidation Divestification Acquisitions and Mergers Vertical Integration Horizontal Integration

The six phases of growth

Organization practices during evolution in the five phases of growth

Three Intensive Growth Strategies- Ansoff's Product or Market Expansion Grid

Performance Importance Matrix

Successive Sets Involved in Customer Decision Making

Major Classes of Growth Opportunities

Comparison of Strategic Profiles of Texas Instruments and Hewlett-Packard

Strategy Implementation

Strategy implementation - Definition
Strategy implementation – finding the resources which, when used properly (accurate to circumstances) result in obtaining strategic target by an organization. J.M. Lehner Source: [P. Kubiński, 2005]

Patterns of strategy implementation
Big Small Staff effort in strategy formulating and implementing Top management efforts in strategy formulating and implementing Directive pattern Reorganizational Collaboration Cultural Self-made Source: [P. Kubiński, 2005]

Sequence of strategy building and implementing
Strategic aims and targets. Activity programs at functional areas, supply, production, technology, marketing, distribution finance, organizations. Dimensions and measures of achievements. People responsible for coordination and realization. Budgets and realization requirements (material and non material investments) Control system of program realization Source: [Obłój, 1998, p. 79]

Types of strategies and adequate structures – according to Chandler
Strategy Organizational structure One product Functional/ centralized Diversification Departments/ decentralized Mixed diversification Holding/strongly decentralized Source: [P. Kubiński, 2005]

Marketing plan direction
Source: M. Wood, 2004

Ways Firms Can Differentiate Their Products
To differentiate their products, firms can focus directly on the attributes of it products or services , or 1. Product features 2. Product complexity 3. Timing of product introduction 4. Location on relationships between itself and its customers, or 5. Product customization 6. Consumer marketing 7. Product reputation on linkages within or between firms 8. Linkages among functions within a firm 9. Linkages with other firms 10. Product mix 11. Distribution channels 12. Service and support Source: J. Barney & W. Hesterly, 2006, p. 147

Organising to Implement Product Differentiation Strategies
Organizational Structure: 1. Cross-divisional/cross-functional product development teams 2. Complex matrix structures 3. Isolated pockets of intense creative efforts: Skunk works Management Control Systems: 1.Broad decision-making guidelines 2. Managerial freedom within guidelines 3. A policy of experimentation Compensation Policies 1. Rewards for risk-talking, not punishment for failures 2. Rewards for creative flair 3. Multidimensional performance measurement Source: J. Barney & W. Hesterly, 2006, p. 164

The Organizational Requirements for Implementing Cost Leadership and Product Differentiation Strategies Cost leadership Product differentiation Organizational structure 1.Few layers in the reporting structure 2. Simple reporting relationships 3. Small corporate staff 4. Focus on narrow range of business functions 1. Cross-divisional,cross-functional product development teams 2. Willingness to explore new structures to exploit new opportunities 3. Isolated pockets of intense creative efforts Source: J. Barney & W. Hesterly, 2006, p. 169

The Organisational Requirements for Implementing Cost Leadership and Product Differentiation Strategies Management control systems 1. Tight cost-control systems 2. Quantitative cost goals 3. Close supervision of labor, raw material, inventory, and other costs 4. A cost leadership philosophy Management control systems 1. Broad decision-making guidelines 2. Managerial freedom within guidelines 3. Policy of experimentation Compensation policies 1. Reward for cost reduction 2. Incentives for all employees to be involved in cost reduction 1. Rewards for risk-taking, not punishment for failures 2. Rewards for creative flair 3. Multidimensional performance measurement Source: J. Barney & W. Hesterly, 2006, p. 169

The balanced Scorecard pprovides a framework to translate a sstrategy into Operational Terms

Entrepreneutrial Stucture

Functional Structure

Divisional Structure

Strategic Business Unit Structure

Matrix Structure

Intrapreneutrial Unit with Division Structure

The Strategic Planning. Implementation, and Control Process

McKinsey 7-S Framework

Relationship between Marketing and Strategic Planning

PRODUCTION MANAGEMENT

Similar presentations

Presentation on theme: "PRODUCTION MANAGEMENT"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

PRODUCTION MANAGEMENT

Similar presentations

Presentation on theme: "PRODUCTION MANAGEMENT"— Presentation transcript:

Similar presentations

About project

Feedback