Business Growth

and Strategy

Strategic Analysis

Strategic management

strategic and day-to-day management

the components of strategic management

strategic

analysis

strategic

choice

strategic

implementation

Importance of the business environment

PEST analysis

Strategic Analysis

Porter's five forces model

the five forces

the

bargaining power of suppliers

the

bargaining power of buyers

the

threat of potential new entrants

the

threat of substitutes

the

extent of competitive rivalry

Porter's Five Forces Model

Industry competitors

Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)

Porter's Five Forces Model

Industry competitors
Rivalry among
existing firms

Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)

Porter's Five Forces Model

Potential
entrants
Threat of
new entrants

Industry competitors
Rivalry among
existing firms

Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)

Porter's Five Forces Model

Potential
entrants
Threat of
new entrants

Industry competitors
Rivalry among
existing firms

Threat of
substitutes

Substitute
products
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)

Porter's Five Forces Model

Potential
entrants
Threat of
new entrants
Bargaining power
of suppliers

Industry competitors

Suppliers
Rivalry among
existing firms

Threat of
substitutes

Substitute
products
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)

Porter's Five Forces Model

Potential
entrants
Threat of
new entrants
Bargaining power
of suppliers

Industry competitors Bargaining power

of buyers

Suppliers

Buyers
Rivalry among
existing firms

Threat of
substitutes

Substitute
products
Source: Michael E. Porter Competitive Strategy: Techniques for Analyzing Industries and Competitors, (The Free Press, 1980)

Strategic Analysis

Porter's five forces model

the five forces

the

bargaining power of suppliers

the

bargaining power of buyers

the

threat of potential new entrants

the

threat of substitutes

the

extent of competitive rivalry

factors affecting each of the forces

Strategic Analysis

Porter's five forces model

the five forces

the

bargaining power of suppliers

the

bargaining power of buyers

the

threat of potential new entrants

the

threat of substitutes

the

extent of competitive rivalry

factors affecting each of the forces

limitations of the five forces model

Strategic Analysis

Value chain analysis

nature of value chain analysis
primary activities

inbound

logistics
operations
outbound logistics
marketing and sales
service

secondary activities
procurement
technological

development
human resources management
firm infrastructure

The value chain

Outbound
logistics
Operations

e
em
cur
nt

Inbound
logistics

Pro

inf Firm
ra s
t ru
c tu
re

Marketing
and sales

ical
log
ent
hno
Tec elopm
dev

Hu
ma
ma n res
nag ou
e m r ce
e nt

After-sales
service

Strategic Choice

Environment or market-based strategy

types
cost

leadership
differentiation
focus

importance of establishing: the

basis of a firm's competitive advantages

the nature of the target market

Resource-based strategy

exploiting core competencies

defining & establishing core competencies

Growth Strategy

Growth by internal expansion

product differentiation

vertical integration

diversification

Growth by external expansion: mergers

and takeovers

horizontal mergers

vertical mergers

conglomerate mergers

Alternative growth strategy

GROWTH OF A FIRM

Internal expansion

External expansion

(1) Differentiation

(1) Horizontal integration

Horizontal expansion
(same product, increase
in market share)

Mergers of firms
producing the same
product

(2) Vertical integration

(2) Vertical integration

Different products, but

belonging to different
stages of same product

Mergers of firms producing

at different stages of same
process

(3) Conglomerate

(3) Conglomerate

Diversification introduction of totally

different products

Diversification - merger of
firms producing totally
unrelated products

Growth Strategy

Growth by internal expansion

financing internal growth

borrowing
share

issue

ploughing-back
the

profit

takeover constraint

Growth Strategy

Growth by internal expansion (cont.)

growth through vertical integration

backward

integration ('upstream' integration)

forward integration ('downstream' integration)

why vertically integrate?

economies

of scale
reduced uncertainty
monopoly power
barriers to entry

growth through diversification

advantages

when existing market is saturated

spreads risks

Growth Strategy

Growth through mergers and takeovers

types of merger and takeover

horizontal
vertical
conglomerate

motives for mergers and takeovers

growth
economies

of scale
monopoly power
increased market valuation
reduced uncertainty
other motives

effects of mergers on consumers

Financing Growth and Investment

Sources of business finance

internal sources
ploughed-back

profit

external sources
banks

mainly short- and medium-term finance

stock

market

longer-term finance
problem

of 'short-termism'

international sources

Financing Growth and Investment

The role of the Stock Exchange

primary market
secondary market
advantages

brings

together savers & firms seeking finance

regulates firms and helps encourage confidence
facilitates mergers and takeovers
reduces transaction costs of investment finance

disadvantages
cost

of getting listed
possible short-termism and instability

Financing Growth and Investment

Is the stock market efficient?

the efficient market hypothesis

share

prices reflect information about

companies' current and expected future
performance

implications of stock market efficiency

benefit

of speculation diminishes as efficiency

increases

perfect

efficiency and share prices following a

'random walk'

Staying Small

EU definition of SMEs

by number of employees
micro

enterprises

small

enterprises

medium

enterprises

by turnover

EU SME definitions

EU SME definitions

EU SME definitions

EU SME definitions

Staying Small

Competitive advantage and small firms

flexibility

quality of service

production efficiency and low overheads

product development and innovation

Problems facing small businesses

selling and marketing

funding R&D

management skills

less ability to gain economies of scale