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Preparation for Strategy Development
Sheikh Morshed JahanAssociate Professor
IBA, University of Dhaka1
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1. Stakeholder Analysis
2. PESTLE Analysis3. Porters Diamond4. Five Forces Model5. Life Cycle Model6. Strategic Questions7. Dynamics of Competition
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Part 1:
Stakeholder Analysis
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Whoever (person or organization) has astake (or interest) in the actions or
performances of a company is a stakeholderto that company.
Stakeholder analysis is the process ofidentifying such actors-with-stake andanalyzing their interest and influence/powervis--vis the action/strategy of the enterprise
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Primary Stakeholders(Shareholders/Owners, Customers,Employees, and Value ChainPartners)
Secondary Stakeholders(Competitors, Trade and IndustryAssociations & Chambers, LocalCommunities, Educational Institutes,Government, etc.)
Tertiary Stakeholders(Society at Large, DevelopmentPartners, Media, etc.)
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Source: Adapted from A. Mendelow, Proceedings of the Second International Conference on Information Systems, Cambridge, MA, 1991.
Johnson, Scholes & Whittington (2005)
ExploringCorporate Strategy, 7th Edition, Pearson Education
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Stakeholder Analysis helps strategist tobetter understand the likely response (to its
activities and moves) from the stakeholders
It helps better utilization of resources (e.g.attention or time) as it involves managementof stakeholders
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Part 2:
PESTEL Analysis
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PESTEL framework categorizes macro environmentinto six main categories:
Political
Economic
Socio-cultural
Technological
Environmental Legal
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Source: Johnson, Scholes & Whittington (2005)
ExploringCorporate Strategy, 7th Edition, Pearson Education
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These (otherwise somewhat-distant-to-business)
forces have significant influence on howbusinesses should respond to forces of differentnature and dynamics
This may be treated as the starting point ofstrategic thinking process
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Part 3:
Porters Diamond
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Porters diamond suggests that there are some
inherent reasons
why some nations are more competitive than the others
&
why some industries within nations are more competitive
than the others
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Porters Diamond
The Determinants of National Advantage
Source: M. Porter, Competitive Advantage of Nations, Macmillan, 1990.
This is an excellent frameworkwhen looking atconditions for business
Johnson, Scholes & Whittington (2005)ExploringCorporate Strategy, 7th Edition, Pearson Education
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Porter suggests that the national home-base of an
organizationplays an important role in creating advantage(for the firm) on a global scale.
Impact of national macro economic factors on the
competitive environment can be better understood by thisanalysis
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Part 4:
5-Forces of Competition
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Source: Adapted from M.E. Porter, Competitive Strategy:Techniques for Analyzing Industries and Competitors 1980, Free Press, 1980, p. 4.Copyright 1980,1988 by The Free Press, a division of Simon & Schuster Inc. Reproduced with permission.
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Buyer power likely to be high when Concentration of buyers
Low cost of switching
Threat of backward integration by buyer
Supplier power likely to be high
Concentration of supplier High switching cost
Threat of forward integration
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Threat of entry Economies of scale and scope
Capital requirement and availability
Access to supply and distribution channels
Access to technology
Customer/supplier loyalty
Expected retaliation from existing firms Legislation/government policy
Differentiation
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Threat of substitution Product-for-product substitution
Substitution of needs
Generic substitution (same wallet substitution)
Competitive rivalry degree depends on-
Equal sized, or one/two dominant? Industry growth rate (life cycle)
Capacity utilization rate
Differentiation potential
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Part 5:
Life Cycle Analysis
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Johnson, Scholes & Whittington (2005)ExploringCorporate Strategy, 7th Edition, Pearson Education
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Part 6:
Competitive Strategy Question Time
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Are some industries more attractive than others? What are the underlying forces in the macro
environment that are driving the competitive forces?
Is it likely that the forces will change? If so, how? How do a particular competitor stand in relation to
these competitive forces? What can the company do to influence these forces or
to navigate through the turbulent wave ofcompetition?
Can barriers to entry be built?
Power over buyer/supplier be increased?
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Part 7:
Dynamics of Competition
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With changes in time, environment changes so does the capabilities and strategies ofthe organization
Erosion in competitive advantage is onlynatural there is nothing called permanent
competitive advantage everything is onlytemporary
This creates a cycle of competition
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Builds or InheritsEntry Barriers
Attacks SoftMarket Segment
Incumbent
No Response
Reinforces Barriers
Entrant
Attacks EntrantsHome Market
Restart the Cycle inAdjacent Market
Starts Price War
Widens Attack toAdjacent Segments
Source: RA DAveniwith Robert Gunther 28Sheikh M Jahan, IBA, Univ. Dhaka
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Market EntryDecision
Lead FirmsResponse
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Part 7:
Team Exercise &Presentation
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Divide into four teams Select an industry of your choice
Perform an extensive analysis using the toolsdiscussed Synthesize the most important discoveries Identify the strategic implications from the
perspective of a prospective entrepreneur Present before the group