Seize Advantage in a DownTurn

1. Seize Advantage in a DownTurn Written by David Rodes & Daniel Stelter • MME-34 - Group 4 • HEPI MOHAMAD FAIZAL • INDAH PANCAWARDANI • SIURI WIDJAJA • ZAKARIA N.D. HALIM

2. Sales Growth Stall Causes by : Beyond Management Control 15% • industri jatuh, semua perusahaan di • di industri tersebut terpengaruh jatuh Within Management Control 85% • industri tidak jatuh, tetapi karena • masuknya beberapa perusahaan • baru, maka perusahaan yang ada di • industri tersebut ada yang jatuh

3. The Causes of Sales Growth Stall Beyond Management Control • regulatory action • Wajib melaksanakan Politic Capital. • Kasus Hero supermarket jatuh karena asing • diperbolehkan masuk • economic down turn • geopolitical changes

4. Industry Sales Growth Stall : • industry sales goes into free fall is a moment when company’ sales growth rate ships into prolonged decline Reborn from growth crisis STALL POINT C Sales Growth Rate B,C D,E B B,C D, E Time Kasus Auto 2000 di USA. Stall point : fixed cost tinggi Jika sales turun, maka dampaknya besar sekali Growth Stall Period Back on Track Living in Sales Growth Stall (protect current business)

5. When DownTurn Happens : ECONOMIC CRISIS Turbo charged Industry C A B • RAPID but Measured • research by Boston Consulting Group • known as “Comprehensive & Aggressive Approach” • RASH ACTION • Scattershot • uncoordinated moves • generate a sense of panic • expensive recovery when economic rebounds • distract from seeing significant opportunities • among in crisis Suffice INACTION - Riskiest response

6. Comprehensive & Aggresive Approach • stabilize your business • protecting it from • downside risk • ensuring that it has the • liquidity necessary to • weather the crisis. • identify ways to capitalize • on the downturn in the • longer term • partly by exploiting the • mistakes of less savvy rivals 1st 2nd • OBJECTVE • Help to identify particular areas where vulnerable & • where action is most immediately needed • Help to communicate to the entire organization IMPLEMENTATION

7. Stabilizeyour business • protectingfromdownsiderisk • Assess our vulnerabilities in a systematic manner at : • the company level • by business unit 1st • OBJECTVE • Help to identify particular areas where vulnerable & • where action is most immediately needed • Help to communicate to the entire organization

8. ProtectingfromDownsideRisk • assessourvulnerabilities • Consider several scenarios • a modest downturn • a more severe recession • a full blown depression Based on available data and analysis • Quantify theimpact • run simulation for each scenario that generate financial outcome • sales volume • prices • variable costs etc • be sure to confront head at the worst case • Operating margins (EBIT) around 10% • Decline in volume and prices • current profit into huge lossess • cash flow deep into red 1st Step 1

9. ProtectingfromDownsideRisk • assessourvulnerabilities Risk Exposure Matrix 1st Impact Step 1 Likelihood • Based on available data and analysis • current global downturn truly stand apart • United States savings (1986 – 1995) • The Japanese Banking Crisis (1990 – 1999) • The Asian Financial Crisis (1998 – 1999) • stall – indebtedness (in USA – 380% of GDP)

10. ProtectingfromDownsideRisk • assessourvulnerabilities • Assess rival’s vulnerabilities • SWOT Analysis relative to competitors : • cost structures • financial position • sourcing strategies • product mixes • customer focus etc • calibrate the actions plan that the competitors most likely to take • example : • assess potential acquisitions with a focus on • vulnerable customers groups of weaker competitors 1st Step 1

11. OBJECTVE • Help to identify particular areas • where vulnerable & where • action is most immediately • needed • Help to communicate to the • entire organization • Stabilizeyour business • ensuring the liquidity Protect financial fundamentals • Adequate cash flow and access to capital 1st Step Protect Improve cash 2 & financing options Optimize Free up cash

12. OBJECTVE • Help to identify particular areas • where vulnerable & where • action is most immediately • needed • Help to communicate to the • entire organization • Stabilizeyour business • ensuring the liquidity Protect The Existing Business 1st Step 2 Rethinking Strategies Effective & Efficiency Manage Top Line Rein Investment

13. OBJECTVE • Help to identify particular areas • where vulnerable & where • action is most immediately • needed • Help to communicate to the • entire organization • Stabilizeyour business • ensuring the liquidity Maximize valuation relative to rivals • a strong balance sheet with low debt levels and secured access to capital • Create a compelling investor communications strategy • Drivers of relative valuation • Seeking attractive M&A • Reassess dividend policy and share buyback plans 1st Step 2 Secure Equity Capital

14. Establish Turbo Charged Team • a formalcrisis management team • dedicatedcrisis management team I MPLEMENT A T I ON • Develop different economic scenarios and • determine how they might affect the business • identify recession-related risks and • opportunities RAPID • prioritize initiatives designed to mitigate the risks and capitalize on the opportunities • Oversee implementation of the initiatives • monitoring their progress and continually • reevaluating them in the light of changes in • the economic landscape.

15. Establish Turbo Charged Team • a formalcrisis management team • dedicated cris is management team To Avoid : I MPLEMENT A T I ON • Insufficient understanding and • appreciation of the evolving crisis 1 • create and maintain a sense of urgency within • the organization • creating a transparent, consistent, and fact-based process • for carrying out the necessary initiatives. RAPID • continually monitor the economic situation • a modest downturn scenario to a worst-case action plan.

16. Establish Turbo Charged Team • a formalcrisis management team To Avoid : I MPLEMENT A T I ON • Senior leaders’ lack of preparation • and commitment 2 • close working relationship with the sponsor of • the company’s recession response (often the CEO) • well informed of progress • direct them for their participation RAPID

17. Establish Turbo Charged Team • a formalcrisis management team To Avoid : I MPLEMENT A T I ON • Failure to see how individual initiatives • are part of a comprehensive plan 3 • establish the priority and timing of initiatives • ensure that the individual measures reinforce one another • continually evaluate initiatives both individually • and collectively • suspending • accelerating • combining existing efforts • Initiating New Ones RAPID

18. Establish Turbo Charged Team • a formalcrisis management team To Avoid : I MPLEMENT A T I ON 4 • Lack of attention to the human element • articulate the threats facing the organization • explain why change is needed • clearly communicate to individuals how they will be affected RAPID

19. How You Gain Invest for the future LONG TERM ADVANTAGE • compromise your ability to capitalize on opportunities • when the economy rebounds • Prioritize the different options, protecting investments • likely to have a major impact on the long-term health • of the company Sanofi -Synthélabo the economic recession that began in 2001 with a solid product portfolio. R&D spending in order to keep its product pipeline robust. R&D expenditure from €950,000 in 2000 to €1.3 million in 2003 gained market share and outperformed peers in the stock market

20. How You Gain Pursue opportunistic and transformative M&A LONG TERM ADVANTAGE • Exploit your competitors’ vulnerabilities to redefine your industry through • consolidation • Closely monitor the financial and operational health of your competitors Carnival only weeks aft er the 9/11 terrorist attacks, interceded in the planned friendly merger of Royal Caribbean and P&O Princess Cruises.

21. How You Gain Rethink your business models LONG TERM ADVANTAGE • wrenching transformation for companies and industries • increase revenue through expansion into adjacent product categories or • horizontal integration IBM redefi ned the company’s business model, transforming IBM from a hardware producer into a computer services and solutions provider

22. Summary#1 Old INACTION - Riskiest response • RASH ACTION • Scattershot • uncoordinated moves • generate a sense of panic • expensive recovery when economic rebounds • distract from seeing significant opportunities • among in crisis • - partly/serial, defensive and then offensive Response to industry stall • RAPID but Measured • RAPID means simultaneously, • Defensive & Offensive New HOW MUCH Business Exposure ? Quantify the impact on the business Build several scenario Assess rivals’ vulnerabilities “Business Exposure”

23. Summary#2 “Business Exposure” Managing business exposure Gain long term advantage DEFENSIVE OFFENSIVE Protect the financial fundamentals Invest for the future Pursue opportunistic and transformative M&A Protect the existing business Maximize your valuation relative to rivals. Rethink your business models Implementation by Establish Team

24. Summary#3 Implementation by Establish Team develop different economic scenarios and determine how they might affect the business identify recession-related risks and opportunities prioritize initiatives designed to mitigate the risks and capitalize on the opportunities monitoring their progress and continually reevaluating them in the light of changes in the economic landscape oversee implementation of the initiatives REBORN FROM CRISIS

25. The Causes of Sales Growth Stall Within Management Control • Strategic factors • Premium position backfires • Contoh Kodak • innovation management breakdown • premature core business abandon • Organizational factors • talent benchmark shortfall

26. Company Sales Growth Stall : is a moment when company’ sales growth rate ships into prolonged decline Reborn from growth crisis B,C D, E STALL POINT Option 1 Sales Growth Rate B,C D, E A,B,C D, E Causes of sales growth stall Option 2 A A, B, C A Time D & E adalah New Entrants A jatuh sendiri, yang lainnya naik terus Stall point bisa karena new entrants Growth Stall Period Back on Track Living in Sales Growth Stall (protect current business)

27. The Causes of Sales Growth Stall Within Management Control • Strategic factors Premium Position Backfires - Is the inability of a company to respond effectively To new – low cost competitive challenges, or To a significant shift in customer valuation of product features Clues in Market Dynamics • The company has lost market share to non premium competitor in its current markets • The key customer increasingly are unwilling to pay premiums for product enhancements

28. The Causes of Sales Growth Stall Within Management Control • Strategic factors Innovation Management Breakdown - Is some chronic problems in managing the internal business processes for updating existing product and services and creating New Ones Clues in Innovation Management Control • The Senior Executive Team resist the proposition that Non-Premium competitors are operate in the same business offering better product and process innovation • The Senior Executive Team commonly dismiss the possibility that Non-Premium competitors and Low End Entrants will penetrate the upper ends of our markets

29. The Causes of Sales Growth Stall Within Management Control • Strategic factors Core Business is Abandoned - Is the failure to fully exploit growth opportunities in the existing core business Dibuat maksimum, jangan ditelantarkan, bisa jatuh Clues in Market & Competitor Research • The Company fails to track shifts in secondary and tertiary customer group behavior • The Company excludes Non-Premium players and Low-End Entrants from its tracking of competitive threats

30. The Causes of Sales Growth Stall Within Management Control • Organizational factors When Talent Comes Up Short - Is a lack of Leaders and Staffs with the skills and capabilities required for strategy execution DELL jago di Desktop, tapi tidak di Notebook (tidak punya) Clues in Market & Competitor Research • The Company fails to track shifts in secondary and tertiary customer group behavior • The Company excludes Non-Premium players and Low-End Entrants from its tracking of competitive threats

31. Summary of Sales Growth Stall RED FLAG for Sales Growth Stall • company’s core customers are increasingly unwilling • to pay a premium for its brand reputation or superior • performance • company is less effectivethan its competitors at • translating Customer Insights into New Product & • Services Categories • company did not reviseabout the capabilities that are • critical to support company’s strategy

32. Escape from Sales Growth Stall Momentum Strategy - Is a coherent set of actions focused on creating the specific conditions needed to produce momentum – succeeds effort lessly How ? • LESS IS MORE • hasilkan more result • feature yang dibutuhkan saja, semaksimal mungkin • CRAFTING ‘Power’ offers • kekuatan daya tarik yang diperjuangkan • MOBILIZING for GROWTH • innovation logic (Blackberry vs Nokia) Rancangan baru Dari Research, dicari apa sich daya tariknya (black box customers) C D A Attractiveness B Offering Persaingan bukan A/B/C/D, tetapi attractiveness Contoh : Blackberry bikin pusing Nokia