STRATEGIC MANAGEMENT 2008

1. WHERE WE ARE NOW AND WHERE WE WANT TO BE STRATEGIC MANAGEMENT2008 Dr Grażyna Leśniak-Łebkowska lebkowska@wemba.edu.pl, mobile: 0 602 237 064 Katedra Zarządzania w Gospodarce - SGH

2. Karl von Clausevitz „ON WAR”: IDEOLOGY: formulation and consolidation of main values ( freedom, justice, welfare, safety) POLICY: undertaking complex ventures and their overall coordination following the ideology (tax reform,reducing unemployment, new foreign policy) STRATEGY: combining activities into complex ventures aimed at implementation of political goals; an instrument of policy TACTICS: ways of efficient use of resources in particular activity and context SOME DEFINITIONS...

3. ORGANIZATIONAL STRATEGY: • H.I.Ansoff: Controlling and shaping main relationships between organization and its environment • K.Ohmae The strategy is aimed at winning at the marketplace due to sustainable competitive advantage, as efficiently as possible. Corporate strategy means undertaking continuous actions necessary to build and sustain the cost effective competitive advantage appropriate to the competitive situation • Chandler Setting the long-term goals and objectives, creating conditions to organizational growth, choice of strategic options and allocating resources respectively • H. Mintzberg Self-determination: who we are and who we want to be

4. STRATEGY AS A PROCESS WHO WE WERE YESTERDAY Past experience: success stories, crisis situations WHO WE ARE TODAY Strategic Analysis Environment (outside – in)) Global (macro-) PESTE Competitive (micro-) „5 forces” External stakeholders SWOT KSF (integrated) Strategic capital of an organization (inside-out) Resources, architecture, capabilities Internal stakeholders WHO WE WANT TO BECOME TOMORROW The choice of strategic options and shaping the strategy Corporate level Business level Functional level Mission, vision, strategic goals and objectives, markets, businesses, Alliances, economics Products/technologies target segments ways of competing Resources, core competences capabilities c’d

5. STRATEGY PROCESS CONT’D PROPOSALS AND CONCEPTS OF STRATEGY Scenarios of the future, strategic options Criteria of evaluation Modelling STRATEGIC OPTION TO BE IMPLEMENTED (THE OUTCOME OF MULTIFACET NEGOTIATIONS) OPERATIONAL PLANS Objectives, tasks, budgets,KPIs, rewarding system (contingency plans) Ventures, projects, continuous processes NECESSARY INTERNAL ADJUSTMENTS (organizational structure, culture, IT, resources) EXECUTION-CONTROL-MODIFICATIONS (intended vs emerging strategy) NEW CYCLE

6. STRATEGY SUCCESS EFFECTIVE IMPLEMENTATION Simple, agreed, long-term goals, Determination to succeed Deep understanding of the business environment Objective appraisal of available resources Resources in excess to current operations

7. STRATEGIC MANAGEMENT IN TURBULENT FIELD COMPETITION A B ? A VISION A H. Mintzberg

8. STAKEHOLDERS • PEOPLE, INSTITUTIONS AND NATURAL ENVIRONMENT AFFECTED BY ORGANIZATIONAL ACTIVITY • EACH STAKEHOLDER IS BINDED WITH ORGANIZATION BY PARTICULAR STAKE INDICATING THE TYPE AND LEVEL OF EXPECTATIONS AND RISKS • INTERNAL STAKEHOLDERS: OWNERS, INVESTORS, SHAREHOLDERS, MANAGERS, EMPLOYEES, TRADE UNIONS • EXTERNAL STAKEHOLDERS: CUSTOMERS, SUPPLIERS, COMPETITORS, CREDITORS, STATE AND LOCAL AUTHORITIES, LOCAL AND INTERNATIONAL (RELATIVE) COMMUNITY,NGOs, NATURAL ENVIRONMENT SPOKESMEN, UNIVERSITIES ETC.

9. TIME HORIZON OF STRATEGY • CORPORATE STRATEGY (IF) AIMED AT SUSTAINABLE DEVELOPMENT: LONG TERM WITH FOCUS ON COMPETITION OF THE FUTURE AND CREATION OF VALUE IN NEW SETTINGS • BUSINESS STRATEGY AIMED AT WINNING IN THE MARKETPLACE - 2-5 YEARS NEEDED TO ESTABLISH COMPETITIVE ADVANTAGE THROUGH STRATEGIC VENTURES REDUCING COSTS OR INCREASING DIFFERENTIATION OR INTEGRATING BOTH OF THEM • RELATIONSHIP STRATEGY: DEPENDS ON THE LINKS WITH DIVERSE STAKEHOLDERS, SOME OF THEM ARE STRATEGIC AND LAST LONG, OTHER ARE TEMPORARY AND SHORT TERM OR OCCASIONAL • TIME HORIZON UNDERGOES SYSTEMATIC SHORTENING DUE TO THE ACCELERATION OF CHANGES BUSINESSES HAVE TO RESPOND, INCREASE OF THEIR INNOVATIVENESS AND PROGRESS IN MANAGING COMPLEX VENTURES

10. SOME CONCLUSIONS FOR STRATEGIC MANAGEMENT • ENVIRONMENT CREATES CHALLENGES PERCEIVED AS OPPORTUNITIES OR THREATS. • TO RESPOND PROPERLY ORGANIZATIONS HAVE TO MONITOR THE GLOBAL ENVIRONMENT WHERE THE FIRST SYMPTOMS OF CHANGE CAN BE TRACKED • ONLY SOME ORGANIZATIONS RESPOND IMMEDIATELY AND MODIFY THEIR STRATEGIES • THE REACTION OF OTHERS VARY IN TIME AND INTENSITY, SOME DO DOT RESPOND AT ALL. THE FIRST REASON IS THE LACK OF ADEQUATE RESOURCES. THE SECOND IS INERTIA. • INNOVATORS SET UP NEW RULES FOR COMPETITION. FOLLOWERS HAVE LESS TIME TO ADJUST AND LIMITED OPPORTUNITIES TO PROFIT FROM THE CHANGE. • STAKEHOLDERS MAY SUPPORT THE CHANGES OR OPPOSE IN CASE OF PERCEIVED CONFLICT OF INTERESTS, THUS CREATING NEW ADDITIONAL RISKS FOR ORGANIZATIONS ATTEMPTING AT SUCCESSFUL ADJUSTMENT. • ORGANIZATIONS ACTIVELY PERFORMING STRATEGIC ANALYSIS AND DESIGNING THEIR REACTIONS ARE BETTER PREPARED TO BUILD FLEXIBLE ARCHITECTURE OF RESOURCES, DEVELOP UNIQUE CAPABILITIES AS THE DIRECT SOURCE OF COMPETITIVE ADVANTAGE

11. NURTURING QUESTIONSBASED ON MICHAEL MISCHE „STRATEGIC RENEWAL. BECOMING A HIGH-PERFORMANCE ORGANIZATION” Prentice Hall 2000 • What makes an organization great and what factors are influencing new competitive dynamics? • Why and how do certin companies consistently outperform their peers and the business community expectations? • Why is that having great high quality products and competitive prices no longer guarantees competitive advantage, breakthrough performance and extraordinary financial results? • How did once dominant companies fall from their lofty positions of industry dominance and investor infatuation? • What do high-performance organizations, irrespective of industry, have in common? • What are the warning signals of strategic performance decline, and can these declines be predicted and avoided? • THE QUESTIONS MAY BE SAME, BUT THE ANSWERS WILL BE DIFFERENT – ALBERT EINSTEIN

12. THE CHALLENGE AND VALUE PROPOSITION THE CHALLENGE: TO BE A GREAT COMPANY TAKES SOMETHING MORETHAN JUST PRODUCTS, LOCATION, FINANCIAL PERFORMANCE, QUALITY, PRICES AND SIZE THE VALUE PROPOSITION: THE OBJECTIVES OF STRATEGY AND STRATEGIC CHANGE ARE TO CREATE AND SUSTAIN LONG-TERM HIGH-PERFORMANCE , COMPETITIVE AND ECONOMIC DOMINANCE IT REQUIRES PERPETUUS ATTEMPTS TO BE THE BEST AND UNIQUE FOR YOUR CUSTOMERS, INVESTORS AND OTHER STAKEHOLDERS, TO COMPETE DIFFERENTLY!

13. THE SOURCES OF VALUE COST AWARENESS EFFICIENT MANAGEMENT OF ASSETS INCREASE OF REVENUES MANAGEMENT OF EXPECTATIONS STRATEGIC PARADOX: (DELOITTE) THE WINNING AND LOOSING COMPANIES ARE THOSE WHO ADOPTED RADICAL STRATEGIES BASED ON THE RIGHT OR WRONG SCENARIO

14. ON CHANGES (SUN TZU) CHANGE IS THE LAW OF LIFE, AND THOSE WHO LOOK ONLY TO THE PRESENT ARE CERTAIN TO MISS THE FUTURE (J.F.KENNEDY, FRANKFURT, 1963) KEY ISSUES TO UNDERSTAND THE NATURE OF ANY CHANGE: • HOW TO CHANGE • WHAT TO CHANGE • AT WHAT VELOCITY TO CHANGE • HOW TO EFFECTIVELY MANAGE AND SUCCESSFULY NAVIGATE CHANGE • KNOWING WHAT STATE AND QUALITIES TO CHANGE TO • DETERMINING THE ORGANIZATION’S CAPABILITY AND REQUIREMENTS TO CHANGE TYPES OF CHANGE • INCREMENTAL (DISRUPTIVE, RADICAL) • TACTICAL (EVOLUTIONARY, MINOR) • SYSTEMIC TRANSFORMATION OUTCOMES FOR STRATEGIC MANAGEMENT: • THREE OBJECTIVES-DRIVEN CHANGE : CREATION AND SUSTAINING HIGH PERFORMANCE, ACHIEVING A DEFINABLE GOAL OR CORRECTING A SPECIFIC PROBLEM, IMPROVING A COMPETITIVE POSITION • LEADERS COULD COMPETE MORE EFFECTIVELY WHEN FOCUS ON SOURCES OF CHANGE AND THE BEST USE ON THEIR OWN RESOURCESI • ONE CANNOT FORESEE THE FUTURE (P.DRUCKER) • FUTURE HAS TO BE INVENTED!

15. FOUR CERTAINTIES IN COMPETING NOWADAYS FIRMS APPEAR AND DISAPPEAR THE AVERAGE STATISTICAL EXISTANCE OF A LARGE INDUSTRIAL COMPANY IS ABOUT 40 YEARS. THIS IS THE EQUIVALENT TO THE AVERAGE LIFESPAN OF THE NEANDERTALIAN MAN (M.MISCHE) • THE VELOCITY AT WHICH CHANGE OCCURS IS AT THE HIGHEST LEVEL THAT HAS EVER BEEN AND CONTINUES TO ACCELERATE AT HIGHER RATES EVERYDAY • THE LEVEL, SCOPE AND AND BREADH OF CHANGE ARE INCREASIBLY UNPREDICTABLE AND MORE SYSTEMIC, AFFECTING MORE AND MORE PEOPLE, ORGANIZATIONS AND SOCIETIES, PROCESSES AND TECHNOLOGIES • THE CLASSIC BOUNDARIES THAT ONCE DEMARKATED INDUSTRIES, ECONOMIES, MARKETS AND COUNTRIES ARE BECOMING INCREASINGLY BLURRED, POROUS, AND TRANSPARENT • THE HISTORICAL SOURCES OF COMPETITIVE ADVANTAGE AND METHODS OF FORMING STRATEGY HAVE BEEN LARGELY NEUTRALIZED OR SIGNIFICANTLY MITIGATED BY GLOBAL POLITICAL AND ECONOMIC CHANGES, RAPIDLY DEVELOPING TECHNOLOGIES AND CHANGING DEMOGRAPHICS

16. INDUSTRIAL MODEL 1900-1985 HORIZONTAL AND VERTICAL INTEGRATION FIRST- MOVER ADVANTAGE CRITICAL MASS AND ECONOMIES OF SCALE COMPETING ON COST, PRICE AND LOCATION SELL-IN/PUSH THROUGH MARKETING INFORMATION IMPORTANTWELL-DEFINED INDUSTRY BOUNDARIES AND PREDICTABLE DYNAMICS HIGH-PERFORMANCE MODEL 2000+ DISAGGREGATION, OUTSOURCING AND COLLABORATIVE PARTNERSHIPS COMPETE ON SPEED, EXCELLENCE AND AGILITY COMPETE ON PROCESS AND SERVICE SELL-THROUGH/PUT THROUGH MARKETING (MAR-COM) KNOWLEDGE IS STRATEGIC INDUSTRY STRUCTURE IS BLURRED, UNCERTAINTY AND AMBIGUITY PREVAILS (BLURR=SPEED X CONNECTIVITY X INTANGIBLES) FUNDAMENTAL CHANGES ARE DRIVING NEW BUSINESS DYNAMICS

17. TRADITIONAL STRATEGIC PLANNING IMITATE, SUBSTITUTE COMPETITORS ARE RIVALSI LEVERAGE SUPPLIERS FOR CONCESSIONS AND LOWER PRICES CREATE VERTICALLY INTEGRATED STRUCTURES ORGANIZE FOR SIZE AND EFFICIENCY COMPETE FOR INDUSTRY POSITION/RELY ON SIZE AND BARRIERS TO ENTRY REDUCE BARGAINING POWER OF CUSTOMERS COMPETE ON PRICE AND LEAST COST CREATE FUNCTIONAL SPECIALIZATION AND SEPARATION WITHIN ORGANIZATION COMPETE FOR MAXIMUM MARKETSHARE WITHIN A WELL-DEFINED INDUSTRY HIGH-PERFORMANCE STRATEGY FORMULATION INNOVATE, COLLABORATE, COMPLEMENT COMPETITORS CAN BE PARTNERS AND CO-OPETITORSI ENGAGE SUPPLIERS AS COLLABORATORS DISAGGREGATE AND FOCUS ON CORE COMPETENCIES AND SELECTIVELY OUTSOURCE OPTIMIZE AGILITY AND ADAPTABILITY CREATE A NEW INDUSTRY/DEFINE NEW RULES OF COMPETING ENGAGE AND DELIGHT THE CUSTOMER COMPETE ON VALUE EMPHASIZE SELECTIVE ORGANIZATIONAL INTEGRATION OF FUNCTIONS AND PROCESSES CREATE VIRTUAL MARKETPLACE ACROSS INDUSTRIES AND OPTIMIZE PROFIT POOLS CHANGES DEFINE NEW RULES IN STRATEGIC THINKING

18. GLOBAL ENVIRONMENT ANALYSISMODEL „PESTE” ENVIRONMENT INTERNATIONAL ECONOMIC POLITICAL HOME SOCIAL ECOLOGICAL TECHNOLOGICAL

19. POLITICAL AND LEGAL FACTORS • Political forces • Coalitions/oposition • Stability of governmental policies in particular areas • Political institutions /lobbying • Legal system and institutions

20. ECONOMIC FACTORS • GDP level and growth dynamics • Economic cycles • Economic policy • Public debth • Economic instututions and infrastructure for business development • Investments rate • Consumption rate • Inflation rate • Labor productivi • Unemployment rate • Price/salary ratio/poverty • Currency exchange rates • Tax level • International competitiveness ratings

21. SOCIAL FACTORS • demography: population size, geographical spread, structure ( age, gender, education) • Ethnic diversity • Culture and lifestyle • Institutions and movements (trade unions, NGOs, strikes, actions) • Labor mobility • Attitude towards foreign investors • Social exclusion level

22. TECHNOLOGICAL FACTORS • R&D investments in business • State investments in scientific research (primary, applied) and knowledge exchange • Institutions for technology development • Patents, trademarks, know-how • Technology transfers • Pace of adopting new technologies • Infrastructural platforms

23. ENVIRONMENTAL (ECOLOGICAL) FACTORS • Environmental pollution level • Infrastructure for environmental protection and sustainable development enforcement • Natural resources reserves and their use • Ecosystems integrity and safety • Environmental impact on health • Knowledge and environmental awareness of citizens, customers, business, politicians, NGOs • Environmental legislation ?

24. BREAKTHROUGH TRENDS2008 HSBC AND WORLD ECONOMIC FORUM HBR POLSKA, LUTY 2008 Illustrative additional material to core course content

25. INCOMING P2P ECONOMYSTAN STALNAKERINTERNATIONAL SOCIAL PORTAL: HUB CULTURE • PEER TO PEER INFORMATION FLOWS • NEW MODELS OF MEDIA BUSINESS • BLOGS, PORTALS, YOU TUBE, SOFTWARE FOR EXCHANGING FILES, WIKIPEDIA… • NEW MODELS OF FINANCIAL SERVICES: • MICRO CREDITS FOR BUSINESS AND HOUSING GUARANTEED BY LOCAL SOCIETY (GRAMEEN BANK, FOUNDED BY MUHAMMAD YUNUS, LECTURER AT CHICAGO UNIVERSITY, BANGLADESH AS LOCATION: ENTREPRENEURSHIP, TRUST, SOLIDARITY) • DIGITAL NETWORKS AND MICRO CREDITS IN DEVELOPED COUNTRIES (KIVA.ORG, PROSPER.COM, LENDINGCLUB.COM) • EXPECTED FURTHER EROSION OF BANK MARGINS -MY SPACE TYPE OF NETWORKS?, PRIVATE CURRENCIES FOR EXCHANGE OF SERVICES? REPUTATION + SCALE EFFECT AS DETERMINANTS OF VALUE • MICRO ENERGY SYSTEMS, HYBRYD CARS, PRODUCERS/CONSUMERS, MICRO REVENUES

26. GENERATION Y MODEL OF WORKTAMARA J. ERICKSON • TASK NOT TIME- ASYNCHRONIC WORKING PREFERENCES AND HABITS (TIME, LOCATION) • REWARDING FOR RESULTS • YOUNG TALENTS, IT AND TECHNOLOGY NOT A PROBLEM, PLAN LESS, WORK FASTER, EASY ELECTRONIC COORDINATION (FAST ADJUSTMENTS), HATE NOMINATIVE TIME OF WORK AND REMUNERATION • VIRTUAL WORKPLACE (IBM, BIG CONSULTANTS, EXPERIMENTS AT BEST BUY-BOOSTED PRODUCTIVITY, RETENTION, BETTER FAMILY-FRIENDS RELATIONS)

27. DOCTORS PRESCRIPTION FOR CEOsDR JEROME GROOPMAN • “TO ERRIS HUMAN”, 1999, INSTITUTE OF MEDICINE • HIGH RISK MANAGEMENT PRACTICES FROM BUSINESS TO MEDICINE • DOUBLED TAUGHER CONTROLLING PROCEDURES • ANALYSIS OF MISTAKES • WRONG DIAGNOSIS IS NOT A TECHNICAL BUT COGNITIVE PROBLEM • TEAM LEARNING ON MISTAKES • HEURISTICS: ANCHORING ERROR, AVAILABILITY ERROR, ATTRIBUTION ERROR • MODERATE TERRORISM LONGLASTING • PUBLIC HEALTH TOOLS: • ISOLATION OF SOURCES • CONSTRAINED DIFFUSION • PROTECTION OF POTENTIAL VICTIMS

28. UNDERSTANDING OPPOSITIONMICHAEL SHEENANBOB CLINTON’S ADVISOR • OPPOSITION IS NOT COMPETITION • UNDERSTANDING PROBLEM AND NEEDS OF CUSTOMERS • LEARNING FROM POLITICIANS • LOOK FOR OTHERS TO BE BLAMED (TOBACCO CAMPAIGNS FOR CLEAN AIR VS PROFIT-SEEKING DEVELOPERS INSTEAD OF SMOKING BAN) • UNDERSTAND, ADOPT, SHOW CONSEQUENCES AND LET CUSTOMERS DECIDE

29. BOARD MEETINGSJOHN J. MEDINA • MORE AND MORE GYM FOR EVERYBODY TO IMPROVE PHYSICAL AND MENTAL CONDITION • PREVENTING DESEASES THAT AFFECT IMPORTANT DECISION MAKING IN BUSINESS

30. CHEATING AND CRIMEDAN ARIELY BEHAVIORAL ECONOMIST, MIT, AUTHOR OF “PREDICTABLY IRRATIONAL”, HARPER COLLINS, 2008 • DISHONEST PEOPLE ACTIVELY LOOKING FOR OPPORTUNITY • HONEST PEOPLE USING OPPORTUNITY, IRRESISTIBLE TEMPTATION TO GAIN JUST A LITTLE BIT MORE, BUT WITH SELF LIMITATION • NON FINANCIAL EXCHANGE WITH FINANCIAL IMPACTS- CHEATING ON LARGE SCALE (ANTIDATING TRANSACTIONS FOR PURCHASING SHARES OPTIONS, FINANCIAL REPORTS FALSIFICATION, CORRUPTION, ENRON LIKE AFFAIRS) • CHEATING DIAGNOSTIC WITH FMRI (PAUL ROOT WOLPE, DANIEL LANGLEBEN) • CYBER CRIMES (SCOTT BERINATO)

31. COMMUNITY NETWORKSMARK KUZNICKY, ELI SINGER, JAY GOLDMAN • PLATFORMS FOR SOCIAL AND INFRASTRUCTURAL REFORMS (MULTI STAKEHOLDERS APPROACH), EG. TORONTO PUBLIC TRANSPORTATION SYSTEM

32. EMPLOYEES OF 21ST CENTURYJOHN SEELY BROWN, DOUGLAS THOMAS • INTERNET GAMES PLAYERS FEATURES: • ORIENTED AT CHANGES IMPROVING THEIR SCORED POSITIONING • APPRECIATE DIVERSIFICATION • HAVE FUN IN LEARNING • ACTIVELY SEARCHING FOR NEW SOLUTIONS FOR PERCEIVED PROBLEMS • LIFE WITH ADRENALINE (ON THE VERGE)

33. SECOND LIFE BUSINESSJANE McGONIGAL, JUDITH DONATH, MICLOS SARVARY, JAN CHIPCHASE • VIRTUAL, ALTERNATIVE REALITY GAME (ARG) AS NICHE MARKET • ARG AS A PROGRESSIVE MODEL FOR BUSINESS, PREDICTING NEEDS AND MOVES OF CLIENTS • AWATARS AND EXPRESSING EMOTIONS, RISKS OF DISCLOSURE • META WORLD: INTERNET AS DOMINATING INTERFACE FOR TRANSACTIONS • META DATA ON CONSUMER BEHAVIOR - PRIVACY • ELECTRONIC DEVICES AS SUBSTITUTES FOR PERSONAL RESPONSIBILITY

34. CITIES OF THE FUTURE AND CSRJAIME LERNER,DAVID VOGEL, GEORGE POHLE • CAREFULLY PLANNED PROJECTS FOR SUSTAINABLE LIVING AND WORKING • NO CHAOTIC GROWTH • BUSINESS ROLE IN CONTRIBUTING TO SUCH CONCEPT • SOCIALLY RESPONSIBLE LOBBYING • CHINESE CITIES “ SECOND LEAGUE” • 300 CITIES TARGETED FOR FURTHER EXPANSION BY INTERNATIONAL INVESTORS • MAJOR CITIES WITH SATURATED MARKETS • 50% OF TOTAL CHINESE POPULATION • 66% OF GDP

35. ISLAMIC FINANCEAAMIR REHMAN, NAZIM ALI • ISLAM LAW AS BASE FOR BANKING TRANSACTIONS • S&P: ASSETS OF $750 M • 25% OF POPULATION ARE MUSLIMS • FOREIGN TRANSACTIONS: EG FORD MOTOR CO SELLING ASTON MARTIN FOR $ 848 M (LBO) • LEADING FINANCIAL INSTITUTIONS CREATE DEPARTMENTS FOR ISLAM BASED TRANSACTIONS (ADVISORY PAGE: WWW.IFSB.ORG) • REVERSE IMPACT ON TRADITIONAL WESTERN BANKING PRODUCTS (ONE CANNOT PROFIT FROM UNETHICAL TRANSACTIONS)

36. EXPERTSMICHAEL MAUBOUSSIN • EXPERTS CAN NOT REPLACE MANAGEMENT AND EMPLOYEES IN THINKING • THEY ARE BETTER TRAINED FOR IDENTIFYING AND STRUCTURING PROBLEMS AS WELL AS FOR WIDE SEARCHING FOR SOLUTIONS • COMMUNICATION PLATFORMS AND SHARED KNOWLEDGE ARE VITAL TO EFFECTIVENESS

37. SUSTAINABLE VS UNSUSTAINABLE TRENDS IN BUSINESSGARRETT GRUENER (ALTA PARTNERS, ASK.COM) • SUSTAINABLE TRENDS BASED ON RENEWABLE RESOURCES, MEETING THE NEEDS OF PRESENT GENERATION WITHOUT COMPROMISING THE NEEDS OF FUTURE GENERATIONS. IF SOMETHING IS BASED ONSUSTAINABLE FOUNDATIONS IT EXPLOITS OPPORTUNITIES THAT HAVE NO END AND BETTER CONTROLS THREATS (TERRORISM, INCREASE OF INFORMATION CAPACITY, PRODUCTIVITY OF AGRICULTURE, URBANIZATION) • UNSUSTAINABLE TREND = IMPOSSIBLE TO CONTINUE BECAUSE OF SHRINKING RESOURCES AND ADVERSE SOCIAL IMPACTS (CO2 EMISSIONS, BIODIVERSITY REDUCTION, RETIREMENT AGE EXTENDED, TRADE UNIONS ROLE)

38. ANALYSING COMPETITIONM. PORTER’S MODEL OF „5 FORCES” (1979) RISK OF NEW ENTRIES INTRA-INDUSTRY RIVALRY BARGAINING POWER OF SUPPLIERS BARGAINING POWER OF BUYERS THREAT OF SUBSTITUTES

39. COMPETITORS ARE: • FIRMS OFFERING SIMILAR PRODUCTS/SERVICES TO THE SAME TARGET GROUP OF CUSTOMERS ON SIMILAR CONDITIONS. THEY COMPETE DIRECTLY WITHIN THE SAME STRATEGIC GROUP • FIRMS OFFERING SIMILAR PRODUCTS/SERVICES (DIFFERENT PARAMETRES) TO DIFFERENT TARGET GROUP OF CUSTOMERS. THEY BELONG TO SEPARATE STRATEGIC GROUPS • FIRMS SATISFYING THE SAME TYPE OF NEED (SUBSTITUTES) • FIRMS COMPETING FOR THE SAME CATHEGORY OF CUSTOMER EXPENDITURES (E.G ENTERTAINMENT, EDUCATION, HEALTH, BASIC NEEDS...) STRATEGIES OF PRESENT AND POTENTIAL COMPETITORS WILL LEAD TO DEVASTATING RIVALRY IF BASED ON SIMILAR CHOICES OF PRODUCTS, CUSTOMERS AND COMPETITIVE ADVANTAGE

40. STRATEGIC GROUPS MAP IDENTYFYING INTRA-INDUSTRY STRATEGIC GROUPS : • SELECTING MAJOR PARAMETERS OF COMPETITION (E.G.: PRICE, QUALITY, MARKET SCOPE, SERVICE ACCESSIBILITY, SALES FORCE, SPECIALIZATION RANGE, BRANDS POWER, LEVEL OF VERTICAL INTEGRATION) • EVALUATING EVERY COMPANY POSITION AGAINST SELECTED (TWO) PARAMETERS • DESIGNING THE STRATEGY MAP CONSISTING OF COMPANIES BELONGING TO IDENTIFIED HOMOGENOUS GROUPS OF COMPETITORS

41. INTENSITY OF COMPETITION DEPENDS ON: • RELATIVE MARKET CONCENTRATION OF BUYERS AND SUPPLIERS • INDUSTRY GROWTH • DIFFERENTIATION POTENTIAL • BARRIERS OF ENTRY • RADICAL INCREASE IN PRODUCTION CAPACITY

42. BARGAINING POWER OF SUPPLIERS VS BUYERS • DEPENDS ON THEIR MARKETS RELATIVE CONCENTRATION RATIO • CONTRIBUTION OF SUPPLIER IN CREATION OF BUYER’S POSITION (IMPACT ON PROFITS, QUALITY, UNIQUENESS) • SWITCHING COST OF SUPPLIER CHANGE • ABILITY TO INTEGRATE BACK AND FORTH AND TO TAKEOVER THE BUSINESS OF FORMER PARTNER

43. THREAT OF SUBSTITUTES INCREASES WHEN: • INDUSTRY IS ATTRACTIVE • ENTRY BARRIERS ARE LOW • ESTABLISHED INCUMBENTS ARE NOT ABLE TO IMPOSE RESTRICTIONS AND REFRAIN COMPETITORS FROM MAKING INROADS

44. RISK OF NEW ENTRIES NEW ENTRANTS ARE: • FIRMS WITH ESTABLISHED POSITION IN THE INDUSTRY BUT ON OTHER GEOGRAPHICAL MARKETS (E. GLOBAL COMPANIES) • START-UPS • LOCAL DIVERSYFYING COMPANIES THREAT OF ENTRY INCREASES WHEN: • MARKET IS ATTRACTIVE • ENTERING COMPANIES CAN EASILY BUILD FAVOURABLE COMPETITIVE POSITION • START-UPS HAVE UNIQUE, BREAKTHROUGH VALUE PROPOSITION • ENTRY BARRIERS ARE LOW

45. ENTRY BARRIERS COMPETITIVE ECONOMIES OF SCALE/LOW AVERAGE COSTS LACK OF ACCESS TO DISTRIBUTION CHANNELS HIGH TECHNICAL STANDARDS AND QUALITY BUREAUCRATIC CUSTOMS LICENCES, PERMITS, HYGENIC ATESTS SPECIFIC REQUIREMENTS OF ADJUSTMENT TO LOCAL MARKET (LANGUAGE, SAFETY) EXIT BARRIERS ECONOMIC LIQUIDATION COSTS DIFFICULTIES IN SELLING OUT UNATTRACTIVE ASSETS SOCIO-POLITICAL TRADE UNIONS PRESSURES TO SUSTAIN EMPLOYMENT LOCAL GOVERNMENTS PRESSURES EMPLOYEES PROTESTS COMPANY MOBILITY BARRIERS

46. MOBILITY BARRIERS AND INDUSTRY PROFITABILITY(QUESTIONABLE) LOW REVENUES LOW AND UNCERTAIN REVENUES LOW AND CERTAIN BARRIERS OF ENTRY HIGH REVENUES HIGH AND STABLE REVENUES HIGH AND UNSTABLE LOW HIGH BARRIERS OF EXIT

47. SCENARIO PLANNING IN STRATEGY SURPRISE SCENARIO STRATEGIC ANALYSIS RANGE OF MONITORED FACTS, TRENDS, BEHAVIORS… MOST LIKELY SCENARIO PESIMISTIC SCENARIO OPTIMISTIC SCENARIO STRATEGIC PLAN OPTIMISTIC VERSION STRATEGIC PLAN PESIMISTIC VERSION STRATEGIC PLAN BASIC VERSION CRISIS: THE NECESSITY TO RE-ANALYSE AND RETHINK THE PLAN FROM SCRATCH

48. SOURCES OF PROFITABILITY CORPORATE STRATEGY INDUSTRY ATTRACTIVENESS STRATEGIA KORPORACJI Where we should compete? PRZEWAGA KONKURENCYJNA COMPETITIVE ADVANTAGE OUTSTANDING PROFITABILITY BUSINESS STRATEGY Business model: how we earn money? How we should compete? AVAILABLE RESOURCES FUNCTIONAL STRATEGY How we acquire and use?

49. KEY SUCCESS FACTORS GENERAL PREMISES FOR SUCCESS DELIVERING PRODUCT OR SERVICE THE CUSTOMER WANTS TO PAY THE PRICE HIGHER THAN COSTS OF PRODUCTION AND DISTRIBUTION DELIVERING PRODUCTS AND SERVICES WHICH AT LEAST SOME CUSTOMERS PREFER TO BUY FROM US THAN FROM OUR COMPETITORS ABILITY TO OVERCOME COMPETITION WHO ARE COMPETITORS WHAT STRUCTURAL FORCES DRIVE COMPETITION WHAT ARE COMPETITIVE PARAMETERS HOW STRONG IS COMPETION HOW TO CREATE COMPETITIVE ADVANTAGE CUSTOMERS ANALYSIS: WHO ARE OUR CLIENTS AND HOW MAKE PURCHASING DECISIONS KEY SUCCESS FACTORS R.GRANT

50. INDUSTRY ATTRACTIVENESS MEASURES • MARKET SIZE > 1 billion (USD) 5 0,5-0,8 3 <0,3 1 • MARKET GROWTH RATE >15% 5 7-11% 3 <2% 1 • MARKET PROFITABILITY >13% 5 2-6% 3 <1% 1 • MARKET CONCENTRATION RATIO 1-2 COMPANIES TOTAL MARKET SHARE 90% 1 5-7 COMPANIES TOTAL MARKET SHARE 50% 3 ANY COMPANY ATTAINS 15 % OF MKT SHARE 5 Kwoka research findings (USA): if 4 companies attain together 75% of mkt share, any other company can have profits over avarage M.ROMANOWSKA