a strategic analysis of an organisation in the Transport industry.
alibashir202222
2020_S1_Lecture2-3.pdf
STRATEGIC PLANNING IN DYNAMIC ENVIRONMENTS (MGT30005)
- WEEK 2 -
§ What business is your organisation in?
§ What industry are you in? (see Levitt’s Marketing Myopia)
§ What customer problem do you solve?
§ What “job” do you do for the customer? § Which value or ”denied value” can you create?
FROM LAST WEEK TO THIS WEEK: FROM BROAD CONTEXT TO SECTOR/ INDUSTRY
“STRATEGY’ IN THE NEWS - EXAMPLE
https://www.theage.com.au/business/companies/woolies-bottles-it-on-pokies-and-gives-customers-what-they-want-20190705-p524da.html
“STRATEGY’ IN THE NEWS - EXAMPLE
https://www.afr.com/companies/retail/green-shoots-metcash-s-bold-strategy-for-growth-20200130-p53wb3
“STRATEGY’ IN THE NEWS – EXAMPLE
https://iview.abc.net.au/show/business
Copyright: www.spotlightgrowth.com
THE TRANS- PORTATION SECTOR
§ “We now have five-forces analysis, core competencies, hypercompetition, the resource- based view of the firm, value chains, and a host of other helpful, often powerful, analytic tools.
§ Missing, however, has been any guidance as to what the product of these tools should be - or what actually constitutes a strategy.
§ Indeed, the use of specific strategic tools tends to draw the strategist toward narrow, piecemeal conceptions of strategy that match the narrow scope of the tools themselves.”
§ “ … The general's challenge — and the value-added of generalship — is in orchestration AND comprehensiveness.”
HAMBRICK & FREDRICKSON (2001): ARE YOU SURE YOU HAVE A STRATEGY?
5 MAJOR ELEMENTS OF STRATEGY (HAMBRICK & FREDRICKSON, 2001)
5 MAJOR ELEMENTS OF STRATEGY: IKEA (HAMBRICK & FREDRICKSON, 2001)
Copyright: Own figure
UNIT CONTENT WILL BE FROM THE OUTSIDE INWARDS
The Strategic Context
The Industry (and Markets)
The Organisation(s)
Copyright: Adopted from Porter (1984)
THE COMPETITIVE ADVANTAGE OF NATIONS
§ Factor conditions are operational issues in the country or region — cost of capital, cost and skill of labour, and cost and availability of resources, including technology and information — as well as infrastructure.
§ Demand conditions are the number and nature of customer preferences.
§ Related and supporting industries help develop efficiencies along the supply chain.
§ Industry strategy, structure and rivalry may force organisations to develop strategies and structures to make them more effective, in order to stay in business.
THE ELEMENTS OF PORTER’S DIAMOND
EMPLOYMENT IN AUSTRALIA OVER TIME BY SECTOR
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
February 1988 February 1993 February 1998 February 2003 February 2008 February 2013 February 2018 Primary
Secondary
Tertiary
Quaternary
Quinary
§ Primary: Agriculture, Forestry and Fishing; Mining § Secondary: Manufacturing; Electricity, Gas and Water Supply;
Construction § Tertiary: Wholesale Trade; Retail Trade; Transport and Storage;
Accommodation, Cafes and Restaurants § Quaternary: Communication Services; Finance and Insurance;
Property and Business Services; Education § Quinary: Health and Community Services; Cultural and
Recreational Services; Personal and Other Services
Copyright: Own figure
WHY ARE SOME FIRMS MORE SUCCESSFUL THAN OTHERS?
Context
COMPETITORS’ offerings
CUSTOMERS’ needs
ORGANISATION’S capabilities
Sweet Spot
KEY QUESTIONS REGARDING THE INDUSTRY AND COMPETITIVE ENVIRONMENT
SIX ELEMENTS OF PESTEL ANALYSIS – FOR THE “MACRO” ENVIRONMENT
PESTEL - AUSTRALIA
https://advantage- marketline- com.ezproxy.lib.swin.edu.au /Analysis/details/country- analysis-report-australia-in- depth-pestle-insights-25973
PESTEL - MELBOURNE
https://advantage- marketline- com.ezproxy.lib.swin.edu.au /CityAnalysis/Summary/mel bourne#&panel1-1
Copyright: Adopted from Porter (1984)
THE COMPETITIVE ADVANTAGE OF NATIONS
Copyright: Porter (2008)
BUT, WHAT INFLUENCES COMPETITION INSIDE THE INDUSTRY? PORTER’S FIVE FORCES MODEL OF INDUSTRY COMPETITION
“… Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. …”
Porter (2008, p78)
BUT, WHAT INFLUENCES COMPETITION INSIDE THE INDUSTRY? PORTER’S FIVE FORCES MODEL OF INDUSTRY COMPETITION
§ Perfect Competition § Monopolistic Competition § Oligopoly § Monopoly
SO, WHAT USUALLY HAPPENS? FOUR MARKET STRUCTURES
§ Characteristics of perfectly competitive markets:
§ Many competing firms § Many buyers
§ Homogenous demand for and homogenous supply of goods or services
§ Perfect information § No barriers to entry or exit
§ Strategic implications of perfectly competitive market structures
§ The firm must accept the market price
§ The firm cannot differentiate its products and services
§ To earn above normal profits, firms must control their costs
§ This is the first of Porter’s generic strategies: COST LEADERSHIP
FOUR MARKET STRUCTURES:
PERFECT COMPETITION (“COMMODITIES”)
§ Characteristics of monopolistic competition
§ Many competing firms § Many buyers § Heterogenous demand for, and heterogenous
supply of goods and services (i.e. product differentiation)
§ No perfect substitutes § Imperfect information (i.e. a role for advertising) § Firms have discretion over pricing
§ Strategic implications of monopolistically competitive markets
§ Firms have several more strategic variables including prices, product design, distribution, promotion and advertising in targeting their offerings to particular market segments or niches.
§ Transactional marketers call these the 4P’s § Porter calls this a second generic strategy:
DIFFERENTIATION
FOUR MARKET STRUCTURES:
MONOPOLISTIC COMPETITION
§ Characteristics of oligopoly § A few large firms § Many buyers § Demand may be homogenous or heterogenous
§ Substantial barriers to entry § Imperfect information
§ Strategic implications of oligopoly
§ The BIG THING about oligopoly is... INTERDEPENDENCE ...that the outcome of a strategic move by an enterprise will depend upon the reaction of its competitor(s)
FOUR MARKET STRUCTURES:
OLIGOPOLY
§ Oligopoly and co-operation § Oligopoly (or high levels of industry concentration)
raises the possibility of anti-competitive behaviour. § Co-operation (whether implicit or explicit collusion)
involves reducing the power of consumers in the determination of the terms of exchange (e.g., prices)
§ Under competitive conditions the secret to an enterprise’s success usually depends upon satisfying the needs and wants of consumers better than one’s competitors.
§ However, under oligopoly there is the alternative strategy of tacit co-operation (i.e., gang up against the consumer!)
§ Co-operation can be achieved without explicit collusion (which, in most Western economies at least, is illegal).
§ With successive strategic moves, enterprises may signal to competitors their intention not to compete on price.
§ Thus an industry convention may become established with enterprises tacitly conforming to unstated rules of limited competition.
FOUR MARKET STRUCTURES:
OLIGOPOLY
§ Characteristics of monopoly § Only one firm, many buyers § Demand may be homogenous or heterogenous § Imperfect information § Barriers to entry
§ Strategic implications of monopoly
§ Monopoly provides the enterprise with a high degree of market power in determining the terms of exchange with customers (i.e. prices)
§ Customers may be faced with necessity rather than choice.
§ The strategic implications for firms are: how can monopolies be created and maintained?
§ ...and it’s this kind of thinking that leads some people to try to think of ways they could “warp” the fabric of the industry/market.... and “maintain” monopoly-like situations by: § Building barriers to entry, forging strategic
alliances, adopting implicitly co-operative behaviors or even explicit collusion with competitors are alternative strategies by which may seek to build/maintain/exploit market power
FOUR MARKET STRUCTURES:
MONOPOLY
Copyright: Porter (2008)
ENVIRONMENT AL ANALYSIS – OVERLAP AND INTEGRATION
“IF YOU WISH TO MAKE AN APPLE PIE FROM SCRATCH,
YOU MUST FIRST INVENT THE UNIVERSE.”
(PAUL SAGAN)
