Alternative Strategies

1. Alternative Strategies STRATEGY DEFINITION EXAMPLE

2. Alternative Strategies STRATEGY DEFINITION EXAMPLE

3. Alternative Strategies STRATEGY DEFINITION EXAMPLE

4. Alternative Strategies STRATEGY DEFINITION EXAMPLE

5. Strategic AnalysisProducts – MarketsMarket/Product Expansion Grid P R O D U C T S M A R K E T S

6. Market Analysis / Coors MARKET ATTRACTIVENESS L O W R I S K H I G H

7. Strategic ManagementProductivity Tree Plant/Office, Facilities, Methods, STDS T Task Technical Feedback - Information MGMT Plan Organize Direct Control P Efficiency Effectiveness Adaptive Job Design Staff Leadership Knowledge, Skills, Ability P Staff Performance Communications Motivation

8. Strategic ManagementThe Firm: Core Competencies • Technology Operating System • Management System • Knowledge-Base Skills / Abilities • Organizational Dynamics, Culture, Climate, Motivations

9. Work Sheet: Internal Assessment of Firms Four Characteristics Resources-Capabilities Important in Sustaining Competitive Advantage • Durability • Transparency • Transferability • Replicability

10. Internal Assessment of Firms • Durability • Rate at which firms underlying resources and capabilities depreciate or become obsolete • Transparency • Speed with which other firms can understand the relationship of resources and capabilities supporting a successful firm’s strategy. Capability that requires a complex pattern of various resources and is more difficult to comprehend than a capability based on a single key resource.

11. Internal Assessment of Firms • Transferability • Ability of competitors to gather the resources necessary to support a competitive challenge. (e.g., Duplicating the primary source of Rocky Mountain spring water may be difficult. Also, brand names may be impossible to transfer with out purchase or a license.) • Replicability • Ability of competitors to use resources and capabilities to duplicate a firm’s success. (e.g., a brand manager from a P&G competitor may fail to identify least visible coordination mechanisms or fail to note behaviors of another company’s brand manager may conflict with company’s culture.)

12. Basic Principles of Organizations • The organization plan should be developed from the point of view of the activities required to achieve the objectives of the enterprise. • Group the activities according to the natural likings of the activities and the usual combinations of abilities and interests of the team members. • Assign persons to natural groupings according to their abilities and interests. • Personal responsibilities, authorities and relationships should be clearly understood and completely accepted not only by the individual but also by all persons affected. • Delegation of authority and the freedom to act should be clearly and appropriately defined and be adequate for the responsibilities assigned.

13. Basic Principles of Organizations • As many as possible of the decisions affecting specific operations and requiring approval before action should be made only one organization step (level) above the person putting the decision into effect. • No person should report to more than one superior. (However, an individual may be assigned by his or her superior to serve or assist another organization unit and receive directions within the assigned sphere of service. • (Span of Control) The number of persons reporting to a superior should be few enough so that he or she can give each person adequate attention and still have time for responsibilities other than direction and supervision such as investigations, planning, etc…

14. Basic Principles of Organizations • Recognize and make good use of the informal organization: I.e., the natural groupings of persons based on friendships and like interests. Watch that cliques or “gangs” do not handicap the official organization. • Titles should be appropriate and consistent. • Keep the organization plan flexible and sensitive to changing conditions.

15. “Pure Project”Dedicated Task Force Organization • Is a separate project organization with most or all personnel needed on the project working under the direct control of the project manager? • Used for major or special projects: I.e., “skunk works” • Hybrid matrix = a project organization with some functions directly controlled and others controlled through a matrix General Manager Project Manager Other Operations Marketing Engineering Network Manufacturing

16. Matrix Project Management General Manager Marketing Network Engineering Manufacturing p e r s o n n e l p e r s o n n e l p e r s o n n e l p e r s o n n e l Project Manager A Project Manager B Within this category are three types of matrix organizations which primarily differ in the relative amount of influence/decision-making power between functional discipline managers and the project management organization. Matrix management generally increases conflict as functional managers and project management often stress different project aspects and goals.

17. Matrix Project Management: Descriptions • Strong or Project Matrix • Here, a project management orientation predominates: a full-fledged project office with support staff may exist • Balanced or “Classical” Matrix • Balanced influence between functional managers and project managers characterizes this arrangement. The full-time project manager has expert power and formal position power. A high level of conflict is often evident. • Weak or Functional Matrix • Functional managers exert a stronger influence than the project manager who is really a coordinator and can be part or full-time. Team members may only be liaisons, linking the project to the functional department.

18. Matrix Management and The Team Member The Problem of Two or More Bosses Project Manager Functional Manager • Ground Rules for Behavior • Keep both bosses informed. • As soon as a conflict emerges (or before), get the bosses together for a meeting and get one to change his or her priorities. • Do not make the mistake of telling each boss what he or she want to hear—You will get squeezed. • Try to work out an agreement in writing that spells out your responsibilities and reporting relationships. Team Member

19. Influence Project ManagementWeakest Project Organization General Manager Project Activator Marketing Network Engineering Manufacturing p e r s o n n e l p e r s o n n e l p e r s o n n e l p e r s o n n e l • Influence project management occurs in a standard functional or hierarchical management organization. • A “project activator” (often staff member) is asked to coordinate a project. This is frequently part-time and with no formal authority. The “activator” merely works through the “influence” of the general manager’s position (“the division manager asked that I do this for him/her.”)

20. Matrix Project Management General Manager p e r s o n n e l p e r s o n n e l p e r s o n n e l p e r s o n n e l Project Manager A Project Manager B

21. Strategic ManagementFirm-Industry Value Chain—A Model

22. Elements of Industry Structure: Porter’s Five-Forces New Entrants Threat of New Entrants S u p p l iers Buyers Industry Competitors Intensity of Rivalry Bargaining Power of Suppliers Bargaining Power of Buyers Adapted from Michael E. Porter, “Competitive Advantage,” New York, The Free Press, 1985. Reprinted by Permission. Threat of Substitutes Substitutes

23. Porter’s Five-Forces: Described • Barriers to Entry • Economies of Scale — Product Differentiation • Brand Identification — Switching Costs • Access to Distribution Channels — Capital Requirements • Access to Latest Technology — Experience and Learning Effects • Government Action • Industry Protection — Industry Regulation • Consistency of Policies — Custom Duties • Foreign Exchange — Foreign Ownership • Capital Movements Among Countries • Assistance Provided to Competitors Adapted from Michael E. Porter, “Competitive Advantage,” New York, The Free Press, 1985. Reprinted by Permission.

24. Porter’s Five-Forces: Described • Rivalry Among Competitors • Concentration and Balance Among Companies • Industry Growth — Fixed (or Storage) Costs • Product Differentiation — Switching Costs • Intermittent Capacity Increasing • Corporate Strategic Stakes • Barriers to Exit • Asset Specialization • One-Time Cost of Exit • Strategic Interrelationships with other Businesses • Emotional Barriers • Government and Social Restrictions Adapted from Michael E. Porter, “Competitive Advantage,” New York, The Free Press, 1985. Reprinted by Permission.

25. Porter’s Five-Forces: Described • Power of Suppliers • Number of Important Suppliers • Availability of Substitutes for the Suppliers’ Products • Differentiation or Switching Cost of Suppliers’ Products • Suppliers’ Threat of Forward Integration • Suppliers’ Contribution to Quality or Service of the Industry Products • Total Industry Cost Contributed by Suppliers • Importance of the Industry to Suppliers’ Profit Adapted from Michael E. Porter, “Competitive Advantage,” New York, The Free Press, 1985. Reprinted by Permission.

26. Porter’s Five-Forces: Described • Power of Buyers • Number of Important Buyers • Availability of Substitutes for the Industry Products • Buyers’ Switching Costs • Buyers’ threat of Backward Integration • Industry Threat of Forward Integration • Contribution to Quality or Service of Buyers’ Products • Total Buyers’ Cost Contributed by the Industry • Buyers’ Profitability • Availability of Substitutes • Availability of Close Substitutes • User’s Switching Costs • Substitute Producer’s Profitability and Aggressiveness • Substitute Price-Value Adapted from Michael E. Porter, “Competitive Advantage,” New York, The Free Press, 1985. Reprinted by Permission.

27. Porter’s Five Forces:As Applied to the Pharmaceutical Industry in the early 1990’s New Entrants Very Attractive S u p p l iers Buyers Industry Competitors Intensity of Rivalry— Attractive Very Attractive Mildly Unattractive Adapted from Michael E. Porter, “Competitive Advantage,” New York, The Free Press, 1985. Reprinted by Permission. Mildly Unattractive Substitutes

28. Porter’s Five-Forces: The Pharmaceutical Industry--Applied • Barriers to Entry (Very Attractive) • Steep R&D experience curve effects • Large economies of scale bariers in R&D and sales force • Critical mass in R&D and marketing require global scale • Significant R&D and marketing costs • High risk inherent in the drug development process • Increasing threat of new entrants coming from biotechnology companies • Bargaining Power of Suppliers (Very Attractive) • Mostly commodities • Individual scientists may have some personal leverage

29. Porter’s Five-Forces: The Pharmaceutical Industry--Applied • Bargaining Power of Buyers (Mildly Unattractive) • Traditional purchasing process highly price insensitive: the consumer (the patient) did not buy and the buyer (the physician) did not pay • Large power of buyers—plan sponsors and cost containment orgs—influence decisions to prescribe less expensive drugs • Mail order pharmacies obtain large discounts on volume drugs • Large aggregate buyers—hospital suppliers, large distributors, gov’t institutions—progressively replace the role of individual customers • Important influence of the government in the regulation of the buying process

30. Porter’s Five-Forces: The Pharmaceutical Industry--Applied • Threat of Substitutes (Mildly Unattractive) • Generic and “me-too” drugs weakening branded, proprietary drugs • More than half of the drug patent is spent in product development and approval processes • Technological development makes imitation easier • Consumer aversion to chemical substances erodes appeal for pharmaceutical drugs

31. Porter’s Five-Forces: The Pharmaceutical Industry--Applied • Intensity of Rivalry (Attractive) • Global competition concentrated among fifteen large companies • Most companies focus on certain types of disease therapy • Competition among incumbents limited by patent protection • Competition based on price and product differentiation • Government intervention and growth of “me-too” drugs increase rivalry • Strategic alliances establish collaborative agreements among industry players • Very profitable industry, however with declining margins • Summary Assessment of Industry Attractiveness

32. Porter’s Five-Forces: The Pharmaceutical Industry--Applied Attractive

33. Strategic ManagementExternal Factors Diagram Global Micro Global Macro STRATEGIC MANAGEMENT FIRM Availability of Substitutes Industry Value Chain Strategic Alternatives

34. Strategic ManagementExternal Factors Diagram--Elaboration • Global Micro • Industry Structure — Government action • Competition — Suppliers • Buyers — Resources: Labor / Unions • Global Macro • Economic • Social / Demographics • Political-Legal: Taxes / Regulations • Technological: Product / Process

35. Strategic ManagementExternal Factors Diagram--Elaboration • Strategic Alternatives • Cost vs. Product Differentiation — Integration: • Simplification: Product / Process Forward, Backward, Horizontal • Joint Venture / Alliance — Retrenchment • Divestiture / Liquidation • Industry Value Chain • Inbound Logistics • Operations – R&D / Technology / Manufacturing • Outbound Logistics • Marketing – Sales / Advertising • Service

36. The Drucker ModelAnswer to 3 Key QuestionsMission Statement • 8 Business Objectives (Drucker) • Market — Human Resources • Innovation — Financial Resources • Profit — Material Resources • Societal — Productivity Strategic Planning is a Continuous Process

37. Product Life Cycle Phase III Maintenance Phase IV Discontinuance Phase II Accelerated Growth Phase I Innovation Introduction Cumulative Sales TIME -- Years

38. Strategic ManagementBusiness Portfolio Matrix HIGH Industry Attractiveness Growth Rate Average Rate of Growth LOW Relative Market Share (Firm vs. largest competitor) HIGH LOW

39. Poker Analogy – Where to BetTechnology Portfolio Matrix HIGH Industry Technology Importance to Product / Service LOW Relative Technological Position (Firm vs. largest competitor) HIGH LOW

40. Strategic ManagementR&D Model RESEARCH DEVELOPMENT Pure Research Applied Research Product/Service Configur-ation Pilot Intro Full Scale Ops INNOVATION RADICAL INCREMENTAL

41. STRATEGIC MANAGEMENTMODEL PORTFOLIO MANAGEMENTRESOURCE ALLOCATION INTERNAL SUPPLY FUND DEMAND FOR FUNDS CASE II IRR CASE I IRR I SURPLUS FUNDS II FUNDS DEFICIT PROGRAMS PROJECTS INVESTMENTS $

42. PRODUCT LIFE CYCLE MODELSALES AND COSTS SALES CUMULATIVE COSTS CUMULATIVE SALES PHASE II ACCELERATED GROWTH PHASE I INTRODUCTION PHASE III MAINTENANCE INNOVATION PHASE IV DISCONTINUANCE BE PRODUCT RESEARCH DEVELOPMENT COST BE ANNUAL TIME - YEARS