Marketing for MOST Module 12 – Strategic Management in the Asia-Pacific 技術経営コンソーシアム開発担当者： Ritsumeikan Asia Pacific University 教授 : Takamoto,

Marketing for MOSTModule 12 – Strategic Management in the Asia-Pacific

技術経営コンソーシアム

開発担当者： Ritsumeikan Asia Pacific University 　教授 : Takamoto, Akihiro

更新日 October, 2003

Module 12: Strategic Management in the Asia-Pacific


1. The Strategic Importance of the Asia Pacific

2. Managing Strategic Alliance

3. Portfolio Management

4. Game Theory

5. Value and Supply Chain Management

6. Balanced Scorecard

1. The Strategic Importance of the

Asia Pacific


The Region


Profile of Asia Pacific Region

• The Asia Pacific region covers 25 countries from Mongolia in the north to New Zealand in the south, and from Pakistan in the west to Kiribati in the east.

• With 1835 million inhabitants, the region represents 32 percent of the world’s population and 25 percents of the world’s output.


Status of Economy


GDP Growth Rate in the AP


Asia Pacific Market

Widely diversified market

– Different status of economic development

– Expectation for quality and service varies

– Market price also varies

– Different cultures and customs

Different approaches required

– - How to manage each market is a critical challenge


Four Major Blocks

• Japan

• Newly Industrialized Economies (NIEs)(Korea, Taiwan, Hong Kong, and Singapore)

• Association of South East Asian Nations(ASEAN)

• China


The Players in the Asia Pacific Arena

• Korean chaebol

Taiwanese

Japan kaishaAmerican MNCsEuropean MNCs

Regional OverseasChinese

Local Small or Medium Sized Firms

Government OwnedFirms

Domestic OverseasChinese

Global

Regional

Local

Low Cost Differentiation

Basis of Competitive Advantages

Sco

pe o

f Op

eration


The Simplest Way to View AP: Groups of Countries on a classic growth curve


A Strategic Framework for the Asia Pacific

Strategy

Ambition

Positioning Investment

Organization

Mission, Vision, Objectives

Structure

System

Process

Choice of: Businesses

Segments

Countries

Choice of: Way to Compete

Choice of: Investment and

Priority for

Resource Development

Assets Building

Competence Creation


The importance of the AP as a Resource Base

IndonesiaChina

Malaysia

Philippines

Korean

Taiwan

Thailand

Singapore

Hong KongJapan

Sourcing Cost Customer Adaptation

Service Technology

Raw Materials

Components

Labor

Logistics

Market

Intelligence

Contact

Flexibility

Financing

Speed New Materials

New Processes


Country Attractiveness in Asia Pacific Region

GDP size

Inflation

Unemployment

Political Stability

Investment Flow

Ease of Licenses

Management Control

Tax Law

Skilled Labor

Cost of Labor

Cost of Premises

Ch

ina

Malaysia

Taiw

an

Sin

gap

ore

Ind

on

esia

Ho

ng

K

on

g

Ph

ilipp

ines

Ko

rea

Th

ailand

Japa

n

Most Attractive Least Attractive

Module 12: Strategic Management in the Asia-PacificEntry Modes in Asia Pacific Region

Established Markets JapanMaturing Markets Taiwan

KoreaGrowth Markets China

Thailand

Indonesia

Malaysia

India

PhilippinesEmerging Markets Vietnam

Myanmar

Laos,CambodiaPlatform

Singapore Hong Kong

Joint Venture

ExpandIntegrate into

global

regional

operationsJoint Venture

Local Operation

Expand

Joint VentureLocal

Subsidiary

Initiate several

business activities

Multiple

presence Rationalization

Agents

Representative

offices

Establish initial

Investment through

Joint venture or

Local subsidiaryEstablish a base

to learn, collect

Information and

set up contacts

Set up a regional

Office to coordinate

efforts

Regional offices

For administration

of synergies

Entry Development Consolidation


Strategic Capabilities in the AP Region

Access to Resources

. Local human resources

. Suppliers and sub-contractors

. Contactors

. Partners

Building Assets

. Logistics

. Distribution networks

. Product development

. Brand reputation

Mind Set

Visibility & support

Flexibility

Markets & Competitive

Intelligence

Social, Cultural,

Political know howDeveloping

RegionalCompetences


Module 12: Strategic Management in the Asia-PacificHow Did The Financial Crisis Affect

Asia Pacific Strategies

Strategies were revised but long-term goals of presence in the region were maintained

Resources needed to be readjusted and expansion plans temporarily delayed, but not abandoned

Flexibility and adaptability remained key competences and could be preserved or enhanced

New opportunities offered by potential acquisitions had to be seriously considered

Module 12: Strategic Management in the Asia-PacificProspects for Asia Pacific

(Beyond The Crisis)

The regional market growth is still prominent

The regional trade liberalization and the gradual reduction of investment restrictions that started well before the crisis and that are all expected to prevail in the long-term.

With increased regionalization and increased number of countries competing for FDI


Economic Cooperation in the Asia Pacific Region

Several regional integration programs – sub-regional, regional, bilateral and multilateral approach.

Regional integration schemes of East Asia, mainly Asia-Pacific Economic Cooperation (APEC), the Association of South-East Asia Nations (ASEAN), ASEAN+3, ASEAN Regional Forum (ARF), and other bilateral cooperation, have strongly impact on recent economic position.

With the Impact of single European Union (EU) and NAFTA concept of trade liberalization, Asia Pacific Economic Cooperation (APEC) was established in 1989 and United States is supporting the APEC initiatives.

The prospect of APEC Common Currency Unit is the next challenge of Asia Pacific Region for the 21st century.

2. Managing Strategic Alliance

Strategic Alliance

• Partnership between two or more entities that allow an

exchange of resources for mutual benefit


Why Form Strategic Alliance

Open new market and territories

Gain greater speed to market

Enhance company’s creditability and value

Increase revenue opportunity

Maintain focus on core strengths

Access new products and technologies


Strategic Alliances

Partnerships between firms

Firm A

Firm B

where their

are combined to pursue mutual interests to

Core Competencies

CapabilitiesResources

DevelopDevelopDevelopDevelop

ManufactureManufactureManufactureManufacture

DistributeDistributeDistributeDistribute

Goods

Services


CombinedCombinedResourcesResources

CapabilitiesCapabilitiesCore CompetenciesCore Competencies

ResourcesResourcesCapabilitiesCapabilities

Core CompetenciesCore Competencies

ResourcesResourcesCapabilitiesCapabilities

Core CompetenciesCore Competencies

Strategic Alliance

Firm AFirm A Firm BFirm B

Mutual interests in designing, manufacturing,Mutual interests in designing, manufacturing,or distributing goods or servicesor distributing goods or services


Types of Strategic Alliances

Equity Strategic Alliance

Equal Partners (50 – 50 %)

Not Equal Partners (30 – 70 %)

Multiple Partners (More Than Two)

Non-Equity Strategic Alliance Contract is given to supply, produce or distribute a firm’s goods

or services

(without equity sharing)


Types of Alliances

LEVEL OF COMMITMENTLEVEL OF COMMITMENT

STRATEGIC STRATEGIC IMPORTANCEIMPORTANCE

Acquisition

Minority Interest

Joint Venture

Joint Marketing

Joint Development Projects

Licensing Agreements

Commercial Contract

Technology Trials

Low

Medium

High

Low High

Module 12: Strategic Management in the Asia-PacificReasons for Alliances by Market Type

Slow Cycle Market

* * Gain access to a restricted market* * Establish franchise in a new market

* * Maintain market stability

* * Gain market power

* * Gain access to complementary resourcesStandard Cycle Market * * Pool resources for large projects

* * Learn new business practices

Fast Cycle Market

** Overcome trade and non-tariff barriers

* * Meet competitive challenge

* * Speed-up product, service or market entry

* * Maintain market leadership * * Form industry technology standards

** Share risky R&D expenses * * Overcome uncertainty


Complementary Alliances

Diversification Alliances

Synergistic Alliances

Franchising

Competition Reduction Alliances

Competition Response Alliances

Uncertainty Reduction Alliances

Types of Strategic Alliances

Business-Level

Corporate-Level


Partnerships that build on the complementarities among firms that make each more competitive

Supplier Value Chain

Buyer Value Chain

Include distribution, supplier or outsourcing alliances where firms rely on upstream partners

Japanese manufacturers rely on close relationships with and among suppliers to implement Just-In-Time inventory systems

Vertical Alliance

Complementary Strategic Alliances

or downstream partnersto build competitive advantage


Used to increase the strategic competitiveness of the partners

Complementary Strategic Alliances

Horizontal Alliance

Buyer Value Chain Buyer Value Chain

For example: Marketing agreements between Various Airlines


Avoiding competition by using tacit collusion such as price fixing

Competition Reduction Strategies

OPEC petroleum cartel

Firms join forces to respond to a strategic action of another competitor

Competition Response Strategies

Many of the airline alliances

Alliances can be used to hedge against risk & uncertainty

Uncertainty Reduction Strategies

Yahoo’s 50% interest in the Overture

Types of Business-Level Strategic Alliances


synergy across multiple businesses between firms

Synergistic Strategic Alliances

Allows firms to grow and relatively strong centralized control without significant capital investments

Franchising

McDonald’s or KFC

Sony shares development with many small firms

Allows a firm to expand into a new product or market area with an acquisition

Diversifying Alliances

Samsung Group’s moves into a range of industries

Types of Corporate-Level Strategic Alliances


International Cooperative StrategiesCross-border strategic allianceCross-border strategic alliance

an international cooperative strategy in which firms with an international cooperative strategy in which firms with headquarters in different nations combine some of their headquarters in different nations combine some of their resources and capabilities to create a competitive advantageresources and capabilities to create a competitive advantage

a firm may form cross-border strategic alliances to leverage a firm may form cross-border strategic alliances to leverage core competencies that are the foundation of its domestic core competencies that are the foundation of its domestic success to expand into international marketssuccess to expand into international markets


International Cooperative Strategies• Allows risk sharing by reducing financial investmentAllows risk sharing by reducing financial investment

• Host partner knows local market and customsHost partner knows local market and customs

• International alliances can be difficult to manage due International alliances can be difficult to manage due to differences in management styles, cultures or to differences in management styles, cultures or regulatory constraintsregulatory constraints

• Must gauge partner’s strategic intent so they do not Must gauge partner’s strategic intent so they do not gain access to important technology and become a gain access to important technology and become a competitorcompetitor

Alliance Success Factors

Have a clear strategic purpose

Find a fitting partner

Allocate task and responsibility

Create incentive for cooperation

Minimize conflicts between partners

Share information

Exchange personnel

Operate with long time horizon

Develop multiple joint projects

Be flexible


References

Hitt Michael. A (1995). “Strategic Management: Competitiveness and Globalization”, West Publishing Company.

Ramu Shiva. S (1997). “Strategic Alliances: Building Network Relationships For Mutual Gain”, A Division of Sage Publications.

Harvard Business Review (2002). “Strategic Alliances”, Harvard Business School Press.

3. Portfolio Management


Portfolio Models

• Portfolio Models: History

– McKinsey sells GE on the idea of Strategic Business Units (SBUs)

– BCG attacks McKinsey with the Growth-Share Matrix and the Portfolio model

– McKinsey responds with its own Portfolio model, the Business Attractiveness Matrix


Portfolio Models

• Boston Consulting Group Matrix

– (BCG Matrix)

• General Electric Grid

– GE Grid


Strategic Business Units (SBUs)

• Most firms consist of multiple units producing numerous products.

• The mission, objectives, strategies, and tactics will be different for each unit.

• For efficiency, a multiproduct organization should be divided according to its major markets or products

• These divisions are called Strategic Business Strategic Business Units (SBUs)Units (SBUs)


Characteristics of a Strategic Business Unit (SBU)

It is a single business or collection of related businesses that can be planned for separately from the rest of the company.

It has its own set of competitors.

It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profits.


Assigning Resources to Each SBU

Analytical tools are needed for classifying businesses by profit potential, for decisions on whether to build,

maintain, harvest, or divest individual SBUs.

Two well-known business portfolio evaluation models are the Boston Consulting Group (BCG) growth/share matrix and the General Electric multi-factor portfolio

matrix


Boston Consulting Group MatrixBoston Consulting Group Matrix

Business portfolio matrix that uses market growth rate and relative market share as the indicators of the firm’s strategic position

• Market growth rate

– A measure of the annual growth percentage of the market in which the business operates.

• Relative market share

– The firm’s market share divided by the market share of its largest competitor.


BCG Growth/Share Matrix

This model classifies SBUs into either:

Question marks (high growth + low market share).

Stars (high growth + high market share).

Cash cows (low growth + high market share).

Dogs (low growth + low market share).


BCG Growth/Share Matrix

Once classified, four alternative objectives can be pursued for each SBU:

Build: increase market share.

Maintain/hold: preserve market share.

Harvest: increase short-term cash flow.

Divest: sell or liquidate.


Stars

Cash cows Dogs

Question marks

High Low

High

Low

BCG MATRIX: COMPANY’S MARKET SHAREIN

DU

ST

RY

GR

OW

TH

RA

TE


HIGH

LOW

LOW

An

nu

al r

eal r

ate

of

mar

ket

gro

wth

(%

)

Relative market share

Earnings: high stable

Cash flow: high stable

Strategy: milk

Earnings: low, unstable

Cash flow: neutral or negative

Strategy: divest

Earnings: high stable, growing

Cash flow: neutral

Strategy: invest for growth

Earnings: low, unstable, growing

Cash flow: negative

Strategy: analyze to determine whether business can be grown into a

star, or will degenerate into a dog

HIGH

$$$$$$

?

Portfolio Planning Models: The BCG Growth-Share Matrix


BCG Growth-Share Matrix

Stars Question Marks

Cash Cows Dogs

22

20

18

16

14

12

10

8

6

4

2

0

10x

4x 2x1.

5x 1x

0.5x

0.4x

0.3x

0.2x

0.1x

Relative Competitive Position

Bu

sin

ess

Gro

wth

Rat

e (P

erce

nt)

Source: B. Hedley, “Strategy and the Business Portfolio,” Long Range Planning (February 1997), p. 12. Reprinted with permission.

Module 12: Strategic Management in the Asia-PacificBoston Consulting Group’s

Four Cell Business Portfolio Matrix

• Question Marks/Problem Children

– Rapid Market Growth

– Cash Needs are High (Cash Hog)

– Options

• Aggressive Grow-and-Build

(Overall and Reposition) or

• Divest


Characteristics of Cash Hogs

• A business is a cash hog when its internal cash flows are inadequate to fully fund its need for working capital and new capital investment the parent company has to continually pump in capital to “feed the hog”

• Strategic options– Aggressively invest in

attractive cash hogs

– Divest cash hogs lacking long-term potential


Boston Consulting Group’s Four Cell Business Portfolio Matrix

• Stars

– Market Leaders in High Growth Industry

– Young Stars or Cash Hogs

– Mature Stars or Cash Cows

– Aggressive Growth


Characteristics of Cash Cows

• A cash cow business generates cash surpluses over and above what is needed to sustain its present market position

• Such businesses are valuable because surplus cash can be used to

– Pay corporate dividends

– Finance new acquisitions

– Invest in promising cash hogs

• Strategic objective: Aggressive Growth or Fortify and defend present market position--keep the business healthy!!!


Boston Consulting Group’s Four Cell Business Portfolio Matrix

• Dogs

– Low Growth Market with Low Market Share

– Weak Competitive Position and Low Profit Potential

– Strategy is to:

• Harvesting - if profitable

• Divestiture

• Liquidation


Portfolio Planning Models: Applying the BCG Matrix to BM Foods Inc.

An

nu

al re

al ra

te o

f m

ark

et

gro

wth

(%

)


2 1.5 1 0.5 0.1

-2

0

2

4

6

8

10

Frozen fooddivision

Fruit juicesdivision

Bakery division

Health foodsdivision

Current position Previous position. Area of circle proportional to $ sales.


Matrix uses business strength compared to

market attractiveness

Business strength (strong, average, or weak).

Market attractiveness (high, medium, low).

GE Multi-factor Matrix


High Low

High

Low

BUSINESS POSITIONM

AR

KE

T A

TT

RA

CT

IVE

NE

SSMedium

Medium

INVESTINVEST INVESTINVEST PROTECTPROTECT

INVESTINVEST PROTECTPROTECT HARVESTHARVEST

PROTECTPROTECT HARVESTHARVEST DIVESTDIVEST

The GEThe GEBusiness Business ScreenScreen

The GEThe GEBusiness Business ScreenScreen


Market Attractiveness Matrix (GE)

BUSINESS POSITON

STRONG

MA

RK

ET

AT

TR

AC

TIV

EN

ES

S

LO

WM

ED

IUM

HIG

H

MEDIUM WEAK

Low Attractiveness

Medium Attractiveness

High Attractiveness


GE Nine CellAttractiveness/Strength Matrix

• Use quantitative measures of industry attractiveness and business strength to plot location of each business in matrix

• Each business unit appears as a circle

• area of circle can represent relative size of industry with pie slice showing the company’s market share


Indu

stry

(Pro

duct

-Mar

ket)

Attr

activ

enes

sBusiness Strength-Competitive Position

Strong Average Weak

High

Medium

Low

Winners

Winners Winners

ProfitProducers

AverageBusiness

Questionmarks

Losers Losers

Losers

McKinsey GE Stoplight Matrix


Industry Attractiveness Factors

• Market size and projected growth• Intensity of competition• Emerging opportunities and threats• Seasonal and cyclical factors• Resource requirements• Strategic fits and resource fits with present

businesses• Industry profitability• Social, political, regulatory, and environmental factors• Degree of risk and uncertainty


Example:Rating Industry Attractiveness

Attractiveness Rating

5

8

2

6

4

7

4

5

Weighted Industry Rating

0.75

2.40

0.10

0.30

0.20

1.05

0.60

0.50

5.90

Weight

0.15

0.30

0.05

0.05

0.05

0.15

0.15

0.10

1.00

Industry Attractiveness Factor

Market size and projected growth

Intensity of competition

Emerging industry opportunities and threatsSocial, political, regulatory, and environmental factors

Seasonality and cyclical influences

Resource requirements

Industry profitability

Degree of risk and uncertainty

Sum of weights

Industry attractiveness rating

Rating Scale: 1 = Unattractive; 10 = Very attractive


Evaluate Each BusinessUnit’s Competitive Strength

Objectives

– Determine how well each business is positioned in its industry relative to rivals

– Evaluate whether it is or can be competitively strong enough to contend for market leadership

# 1 !


Factors to Use in Evaluating Competitive Strength

• Relative market share

• Ability to compete on cost

• Ability to match rivals on quality and/or service

• Ability to exercise bargaining leverage with key suppliers or customers

• Technology and innovation capabilities

• How well business unit’s competitive assets and competencies match industry KSFs

• Brand name recognition and reputation

• Profitability relative to competitors


Example: Rating a Business Unit’s Competitive Strength

Strength Rating

5

8

2

6

4

7

4

5

Weighted Strength Rating

1.00

2.00

0.10

0.60

0.20

1.05

0.40

0.50

5.85

Weight

0.20

0.25

0.05

0.10

0.05

0.15

0.10

0.10

1.00

Competitive Strength Measure


Ability to compete on cost

Ability to match rivals on quality or service

Technology/innovation capabilities

How well resources match KSFs

Brand name reputation/image

Degree of profit relative to rivals

Sum of weights

Competitive strength rating

Rating Scale: 1 = Weak ; 10 = Strong

Bargaining leverage


Strategy Implications of GE Attractiveness/Strength Matrix

• Businesses in upper left corner

– Accorded top investment priority

– Strategic prescription is grow and build

• Businesses in three diagonal cells

– Given medium investment priority

– Invest to maintain position

• Businesses in lower right corner

– Candidates for harvesting or divestiture

– May be candidates for an overhaul and reposition strategy


Advantages of Portfolio Analyses

• Encourages top management to evaluate each business individually; to set objectives; and consider resources.

• It stimulates use of external data to supplement management’s judgment.

• Its graphic representation makes interpretation and communication easier.


Limits of Portfolio Analysis

• All the portfolio models still remain a set of very primitive tools to deal with the real world of business – which is very complex characterized by multi-dimensional variables.

• The portfolio model should be regarded as a tool to sharpen and deepen our strategic thinking rather than an executive summary of strategic analysis.

4. A COGENT GAME THEORY


A GAME

• A form of recreation constituted by a set of rules that specify an object to be attained and the permissible means of attaining it

• Win or Lose

• Business = Win or Lose?

• Win-Win, Lose-Lose, Win-Lose

• Everything is fair in Love, War, and Business


GAME THEORY

• Started by a book “Theory of Games and Economic Behavior” by John Von Neumann and Oskar Morgenstern

• Rule based games

• Free-wheeling games


QUINTESSENCE OF GAME THEORY

• Added values

• Allocentrism: focusing on others

• Look forward and reason backward

• Shape the game according to your strategies


CO-OPETITION

• Cooperative competition

• Win-Win and Win-Lose strategies

• Lose-Lose scenario

• General Motors: GM credit card (Win-Lose strategy)

• Imitation by Ford and Volkswagen

• Win-Win strategy: Imitation by others is beneficial for you


COMPANYS’ VALUE NET

ComplementorsSubstitutors

Suppliers

Customers

Company


INTERACTIONS IN THE VALUE NET

• Resources flow from the suppliers to the company whereas, Products and services flow from the company to its customers

• Money flows from customers to the company and from the company to its suppliers

• Substitutors: Coca-Cola and Pepsi

• Complementors: Hardware and Software


PARTS

Elements of the game

Added Values

Rules

Tactics

Scope

Players


• Players are customers, suppliers, substitutors, and complementors

• Added values are what players bring to the game

• Rules give structure to the game

• Tactics are the ways to play the game

• Scope describes the boundaries of the game


CHANGING PARTS

• P: It’s beneficial to change a player but find a strong player with branded and superior products

• As substitutors are usually seen only as enemies, complementors are seen only as friends

• A: Raise your own added value or lower that of others (example: Trans World Air-lines’, Nintendo, and softsoap)

• Meet the customers’ demands, use your resources efficiently, implement ways to lower the costs


• R: “One price to all” and “Look forward and reason backward” rules make a new players’ entry profitable

• Judo economics: stay small and turn the previous players’ larger size to your own benefit

• Meet-the-Competition Clause (MCC): A classic case of coopetition. A producer can capture more than its added value


• T: Changing perceptions

• Lifting the fog: reducing misperceptions

• Thickening the fog: creating uncertainty

• S: A game in one place can affect games elsewhere, and a game today can influence games tomorrow


THE TRAPS OF STRATEGY

THE TRAPS OF STRATEGY

Fail to think methodically

about changing the

game

Accept the game you find

yourself in

Changing the game must come at the expense of

others

What you don’t see, you can’t

change

You have to find something to do that others can’t


MIXED STRATEGY

• By randomize move, you can surprise the opponent

• Mixed Strategy: Specifies that an actual move be chosen randomly from the set of pure strategies with some specific probabilities

• Nash Equilibrium in Mixed Strategies: A probability distribution for each player

• The distributions are mutual best responses to one another in the sense of expectations


PRISONERS’ DILEMMA

• Companies spend a large sum of money on publicity of their products

• To leave a long lasting impact on the viewers, you need to have something extraordinary

• Click on this link and have a look at this commercial: E*Trade

• Does it leave some impact on you?


SONY VS. MICROSOFT

Microsoft (Xbox)

No publicity Publicity

Sony (PS)

No Publicity

5 , 5 2 , 6

Publicity 6 , 2 3 , 3

Players

PLAYERSMoves

Payoffs


STRATEGIES AND PAYOFFS

• If Microsoft publicizes its Xbox, the best move for Sony is to publicize its PS

• If Microsoft does not publicize, still the best move for Sony is to publicize

• It means Sony has a dominant strategy of publicizing regardless of Microsoft's moves

• Microsoft has same dominant strategy to publicize regardless of Sony’s moves


• Nash equilibrium: An outcome from which no player has an incentive to deviate unilaterally (John Nash: Nobel prize, Economics 1994)

• Nash equilibriums are self-enforcing

• Involvement and commitment: The difference between these two is like eggs and ham. The chicken is involved but the pig was committed.


USE OF THE GAME THEORY

When to compet

e

When to co-

operate

Firm

When you are increasing the size of the pie: Co-operate

When you are dividing the pie: Compete


CONCLUSION

• Game theory will keep on growing because of the importance of added values in business

• Firms should stop thinking that “business is a war and they must beat the competition”

5. Value and Supply Chain Management


SupportActivities

Primary Activities

Value Chain AnalysisValue Chain Analysis

Technological DevelopmentTechnological Development

Human Resource ManagementHuman Resource Management

Firm InfrastructureFirm Infrastructure

ProcurementProcurement

Inb

oun

d

Inb

oun

d

Log

isti

csL

ogis

tics

Op

erat

ion

sO

per

atio

ns

Ou

tbou

nd

Ou

tbou

nd

Log

isti

csL

ogis

tics

Mar

ket

ing

Mar

ket

ing

& S

ales

& S

ales

Ser

vice

Ser

vice

helps to identify which resources and capabilities can add value

MARG

IN

MARG

IN

MARGIN

MARGIN


Value Chain Analysis

Primary and

Support Activities

in the Value Chain

MARG

IN

MARGIN

SupportActivities{

Procurement

Technological Development

Human Resource Management

Firm Infrastructure

Primary Activities{Inbo

und

Logi

stic

s

Ope

ratio

ns

Out

boun

d Lo

gist

ics

Mar

ketin

g an

d Sa

les

Serv

ice



Assessing the PRIMARY Activities in the Value Chain

Inbound LogisticsInbound Logistics•••

Materials control systemInventory control systemRaw material handling and warehousing

OperationsOperations••••

Equipment comparison to competitorsPlant layoutProduction control systemLevel of automation in production processes



Outbound LogisticsOutbound Logistics••

Timeliness and efficiency of finished products deliveryWarehousing of finished products

Marketing and SalesMarketing and Sales••••••••

Marketing researchSales promotions and advertisingAlternative distribution channelsCompetency and motivation of sales forceOrganization’s image of qualityOrganization’s reputationBrand loyalty of customersDomination of various market segments




Customer ServiceCustomer Service•••••

Customer input for product improvementsHandling of customer complaintsWarranty and guarantee policiesEmployee training in customer education & service issuesReplacement parts and services



Assessing the SUPPORT Activities in the Value Chain

ProcurementProcurement•••••

Alternate sources for obtaining needed resourcesTimeliness of resources procurementProcurement of large capital expenditure resourcesLease-versus-purchase decisionsLong-term relationships with reliable suppliers

Technological DevelopmentTechnological Development••••••

R&D activities in product and process innovationsRelationship between R&D and other departmentsMeeting deadlines in technological development activitiesQuality of labs and other research facilitiesQualifications of lab technicians and scientistsCreativity and innovation in organizational culture




Human Resource ManagementHuman Resource Management•••••••

Recruiting, selecting, orienting, and training employeesEmployee promotion policiesReward systems to motivate and challenge employeesAbsenteeism and turnoverUnion-organization relationsEmployee participation in professional organizationsEmployee motivation, job commitment, and satisfaction




Firm InfrastructureFirm Infrastructure•••••••

Identification of external opportunities and threatsAccomplishing goals with strategic planning systemCoordination and integration of value chain activitiesLow-cost capital expenditures & working capital fundsIS support for strategic and operational decisionsRelationships with stakeholdersPublic image as a responsible corporate citizen



Value Chain Analysis: A Pizza Restaurant

PRIMARY ACTIVITIES

• Inbound Logistics

– Transport foodstuffs (e.g. dough, cheese, etc) from suppliers to restaurant

• Operations

– Cook pizzas, salads, wings, other menu items


• Outbound Logistics

– No distribution channels just customers

• Marketing/Sales

– Develop advertising

• Customer Service

– Serve food to restaurant customers

(on-site or logistics with delivery)



• SUPPORT ACTIVITIES

– Procurement– Inbound Logistics: Buy trucks; lease warehouse space

(identify supplier offerings/negotiate terms)

– Operations: Buy dough, cheese, ovens, and other supplies

– Marketing/Sales: Buy TV time, promotional materials/ mailings, etc.

– Service: Buy/maintain tables, chairs, silverware to equip restaurant; buy/maintain automobiles/insurance, etc. for delivery




• Technology Development

– Inbound Logistics: Improve truck routing and warehouse methods

– Operations: Develop new menu items; improve oven/kitchen design

– Marketing/Sales: Discover new promotional materials/methods

– Service: Improve restaurant layout / routing of deliveries



– Human Resource Management

• Inbound logistics: Supervise drivers and warehouse personnel

• Operations: Supervise/train kitchen personnel

• Marketing: Supervise advertising personnel

• Service: Supervise waiters and drivers



– Infrastructure

• Obtain funds, carry out accounting and payroll functions, and perform other administrative tasks for each primary activity area


Supply Chain Management

• Supply-chain is a term that describes how organizations (suppliers, manufacturers, distributors, and customers) are linked together.

• Supply-chain management is a total system approach managing the entire flow of information, materials, and services from raw-material suppliers through factories and warehouses to the end customer.


3

Apply a total systems approach to managing the entire flow of:

MaterialsServicesInformation

Rawmaterialsuppliers

Factories &warehouses

Endcustomer



Logistics as

Competition through Cost

Competition through Quality

Competition through IT

Competition

???

1960 1970 1980 1990 2000 Time

Supply Chain management Sophistication



Supplier Customer

Supply

SupplyManagement

Manufacturing Management

Customer

Satisfaction

Management

Demand

Procurement Planning

Production

Planning

Demand

Planning

Decision ProcessesAnd Systems


6. Balanced Scorecard


What is a Balanced Scorecard?

• "Corporate Dashboard" for a balanced presentation of both financial and operational measures for making decisions.

• Developed in the early 1990's by Drs. Robert Kaplan (Harvard Business School) and David Norton.

• The balanced scorecard is a management system (not only a measurement system) that enables organizations to clarify their vision and strategy and translate them into action.


What the innovator’s thought.

• "The balanced scorecard retains traditional financial measures. But financial measures tell the story of past events, an adequate story for industrial age companies for which investments in long-term capabilities and customer relationships were not critical for success. These financial measures are inadequate, however, for guiding and evaluating the journey that information age companies must make to create future value through investment in customers, suppliers, employees, processes, technology, and innovation.“ -Kaplan and Norton.


Why do we really need a Balanced Scorecard?

• To Succeed in business it is important to measure what you manage.

• The Balanced Scorecard helps us to measure what can’t be measured in business.

• It provides us with feedback and measurements of both internal processes and external outcomes.

• It helps us to continuously update our management strategies and strategic performance.


Source: thebalancedscorecard.org


Four Perspectives

1. The customer perspective:

• Uses measures of the value delivered to customers.

• These measures are evaluated in four different areas namely: time, quality, performance and service, and cost.

2. The internal perspective:

• Measuring company’s satisfaction of customer needs through internal processes.


Four Perspectives

3. The innovation and learning perspective

= the growth perspective:

• Measuring continuous improvement through new product innovation and gradual innovation of existing products.

4. The financial perspective:

=Measure of finances. Income, Share value,

growth of sales, etc.


Scorecard Benefits

• Obtain information to update its strategy on a continuous basis.

• Balance long-term and short-term measures and evaluate every part of the firm and how each contributes toward accomplishing selected goals.

• It helps firms emphasize their relationship between internal and external partners.

• Creates a long-term perspective for company sustainability.


Scorecard Benefits

• A great communication tool between employees as they can use the scorecard as a guide to coordinate their efforts.

• Support employee evaluation in that individual performance can be tied to successful outcomes on the metrics.

• A way to measure the value of the company apart from measuring its tangible assets.

Marketing for MOST Module 12 – Strategic Management in the Asia-Pacific 技術経営コンソーシアム 開発担当者 ： Ritsumeikan Asia Pacific University 教授 : Takamoto,

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Marketing for MOST Module 12 – Strategic Management in the Asia-Pacific 技術経営コンソーシアム開発担当者： Ritsumeikan Asia Pacific University 教授 : Takamoto,