Seize Advantage in a DownTurn

Page 1

MME-34 - Group 4• HEPI MOHAMAD FAIZAL• INDAH PANCAWARDANI• SIURI WIDJAJA• ZAKARIA N.D. HALIM

Written by David Rodes & Daniel Stelter

Page 2

Causes by :

15%

85%

o industri jatuh, semua perusahaan di di industri tersebut terpengaruh jatuh

o industri tidak jatuh, tetapi karena masuknya beberapa perusahaan baru, maka perusahaan yang ada di industri tersebut ada yang jatuh

Page 3

o regulatory action Wajib melaksanakan Politic Capital. Kasus Hero supermarket jatuh karena asing diperbolehkan masuk

o economic down turn

o geopolitical changes

Page 4

B,C

D, E

Industry Sales Growth Stall :

B,C

D,E B

C

Growth Stall Period

Back on Track

Living in Sales Growth Stall(protect current business)

STALL POINT

Reborn from growth crisis

o industry sales goes into free fall

Kasus Auto 2000 di USA. Stall point : fixed cost tinggiJika sales turun, maka dampaknya besar sekali

is a moment when company’ sales growth rate ships into

prolonged decline

Page 5

When DownTurn Happens :

ECONOMIC CRISIS

Industry

AB

C

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

RAPID but Measured o research by Boston Consulting Groupo known as “Comprehensive & Aggressive Approach”

Turbocharged

Suffice

Page 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

IMPLEMENTATION

OBJECTVEo Help to identify particular areas where vulnerable & where action is most immediately neededo Help to communicate to the entire organization

Page 7

Stabilize your business• protecting from downside risk

A. Assess our vulnerabilities in a systematic manner at :o the company levelo by business unit

OBJECTVEo Help to identify particular areas where vulnerable & where action is most immediately neededo Help to communicate to the entire organization

Page 8

Protecting from Downside Risk• assess our vulnerabilities

1. Consider several scenarios o a modest downturno a more severe recessiono a full blown depression

1

Step

Based on available data and analysis

2. Quantify the impacto run simulation for each scenario that generate financial outcome

o sales volumeo prices o variable costs etc

o be sure to confront head at the worst caseo Operating margins (EBIT) around 10%

o Decline in volume and priceso current profit into huge lossesso cash flow deep into red

Page 9

Protecting from Downside Risk• assess our vulnerabilities

1

Step

Risk Exposure Matrix

Catastrophic

Major

Moderate

Minor

Insignificant

Rare Unlikely Possible Likely Almost Certain

Based on available data and analysis current global downturn truly stand apart

o United States savings (1986 – 1995)o The Japanese Banking Crisis (1990 – 1999)o The Asian Financial Crisis (1998 – 1999)

stall – indebtedness (in USA – 380% of GDP)

Page 10

Protecting from Downside Risk• assess our vulnerabilities

B. Assess rival’s vulnerabilities o SWOT Analysis relative to competitors :

o cost structureso financial positiono sourcing strategieso product mixeso customer focus etc

o calibrate the actions plan that the competitors most likely to takeo example :

assess potential acquisitions with a focus on vulnerable customers groups of weaker competitors

1

Step

Page 11

Stabilize your business• ensuring the liquidity

A. Protect financial fundamentals

OBJECTVEo Help to identify particular areas where vulnerable & where action is most immediately neededo Help to communicate to the entire organization

2

Step

Adequate cash flow and access to capital

Free up cash

Improve cash Protect

Optimize

& financing options

Page 12

Stabilize your business• ensuring the liquidity

B. Protect The Existing Business

OBJECTVEo Help to identify particular areas where vulnerable & where action is most immediately neededo Help to communicate to the entire organization

2

Step

Effective & Efficiency Manage Top Line Rethinking Strategies

ReinInvestment

Page 13

Stabilize your business• ensuring the liquidity

C. Maximize valuation relative to rivals

OBJECTVEo Help to identify particular areas where vulnerable & where action is most immediately neededo Help to communicate to the entire organization

2

Step

Secure Equity Capital

a strong balance sheet with low debt levels and secured access to capital

Create a compelling investor communications strategyo Drivers of relative valuationo Seeking attractive M&A

Reassess dividend policy and share buyback plans

Page 14

IMPLEMENTATION

RAPID

Establish Turbo Charged Team• a formal crisis management team• dedicated crisis management 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

Oversee implementation of the initiatives

monitoring their progress and continually reevaluating them in the light of changes in the economic landscape.

Page 15

IMPLEMENTATION

RAPID

Establish Turbo Charged Team• a formal crisis management team• dedicated cris is management team

To Avoid :

Insufficient understanding and appreciation of the evolving crisis

o create and maintain a sense of urgency within the organization

creating a transparent, consistent, and fact-based process for carrying out the necessary initiatives.

o continually monitor the economic situation a modest downturn scenario to a worst-case action plan.

1

Page 16

IMPLEMENTATION

RAPID

Establish Turbo Charged Team• a formal crisis management team

To Avoid :

Senior leaders’ lack of preparation and commitment

o close working relationship with the sponsor of the company’s recession response (often the CEO)

well informed of progress direct them for their participation

2

Page 17

IMPLEMENTATION

RAPID

Establish Turbo Charged Team• a formal crisis management team

To Avoid :

Failure to see how individual initiatives are part of a comprehensive plan

o 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

3

Page 18

IMPLEMENTATION

RAPID

Establish Turbo Charged Team• a formal crisis management team

To Avoid :

Lack of attention to the human element

o articulate the threats facing the organization

explain why change is needed clearly communicate to individuals how they will be affected

4

Page 19

How You Gain

LONG TERMADVANTAGE

Invest for the future

• 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 2000to €1.3 million in 2003

gained market share and outperformed peers in the stock market

Page 20

How You Gain

LONG TERMADVANTAGE

Pursue opportunistic and transformative M&A

• 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.

Page 21

How You Gain

LONG TERMADVANTAGE

Rethink your business models

• 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 producerinto a computer services and solutionsprovider

Page 22

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

INACTION- Riskiest response

RAPID but Measured-RAPID means simultaneously, Defensive & Offensive

HOW MUCH Business Exposure ?

Build several scenario

Quantify the impact on the business

Assess rivals’ vulnerabilities

“Business Exposure”

Page 23

“Business Exposure”

Managing business exposure

Gain long term advantage

Protect the financial

fundamentals

Protect the existing business

Maximize your valuation relative to

rivals.

Invest for the future

Pursue opportunistic and transformative

M&A

Rethink your business models

Implementation by Establish Team

Page 24

developdifferent economic

scenarios and determine how they

might affect the business

Implementation by Establish Team

REBORN FROM CRISIS

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

overseeimplementation of

the initiatives

Page 25

Strategic factors1. Premium position backfires Contoh Kodak innovation management breakdown premature core business abandon

Organizational factors

talent benchmark shortfall

Page 26

Company Sales Growth Stall :

A,

B, C

Option 1

Growth Stall Period

Back on Track

Living in Sales Growth Stall(protect current business)

STALL POINT

Reborn from growth crisis

D & E adalah New EntrantsA jatuh sendiri, yang lainnya naik terusStall point bisa karena new entrants

is a moment when company’ sales growth rate ships into

prolonged decline

A,B,C

D, E

A

A

B,C

D, E

B,C

D, E

Option 2Causes of s

ales

growth stall

Page 27

Strategic factors

- Is the inability of a company to respond effectively

a) To new – low cost competitive challenges, or

b) To a significant shift in customer valuation of product features

Clues in Market Dynamics o The company has lost market share to non premium

competitor in its current marketso The key customer increasingly are unwilling to pay

premiums for product enhancements

1. Premium Position Backfires

Page 28

Strategic factors

- Is some chronic problems in managing the internal business processes for updating existing product and services and creating New Ones

Clues in Innovation Management Controlo The Senior Executive Team resist the proposition

that Non-Premium competitors are operate in the same business offering better product and process innovation

o The Senior Executive Team commonly dismiss the possibility that Non-Premium competitors and Low End Entrants will penetrate the upper ends of our markets

2. Innovation Management Breakdown

Page 29

Strategic factors

- Is the failure to fully exploit growth opportunities in the existing core business

Clues in Market & Competitor Researcho The Company fails to track shifts in secondary and

tertiary customer group behavioro The Company excludes Non-Premium players and

Low-End Entrants from its tracking of competitive threats

3. Core Business is Abandoned

Dibuat maksimum, jangan ditelantarkan, bisa jatuh

Page 30

Organizational factors

- Is a lack of Leaders and Staffs with the skills and capabilities required for strategy execution

Clues in Market & Competitor Researcho The Company fails to track shifts in secondary and

tertiary customer group behavioro The Company excludes Non-Premium players and

Low-End Entrants from its tracking of competitive threats

1. When Talent Comes Up Short

DELL jago di Desktop, tapi tidak di Notebook (tidak punya)

Page 31

company’s core customers are increasingly unwilling to pay a premium for its brand reputation or superior performance

company is less effective than its competitors at translating Customer Insights into New Product & Services Categories

company did not revise about the capabilities that are critical to support company’s strategy

Page 32

LESS IS MOREhasilkan more result feature yang dibutuhkan saja, semaksimal mungkin

CRAFTING ‘Power’ offers kekuatan daya tarik yang diperjuangkan

MOBILIZING for GROWTH innovation logic (Blackberry vs Nokia)

- Is a coherent set of actions focused on creating the specific conditions needed to produce momentum – succeeds effort lessly

How ?

AB

CD

Rancangan baruDari Research, dicari apa sich daya tariknya (black box customers)

Persaingan bukan A/B/C/D, tetapi attractiveness

Contoh : Blackberry bikin pusing Nokia