A1 Warid Tel - International Islamic University, Islamabad

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A1 Warid Tel
PROJECT
BUSINESS POLICY AND STRATEGY
SUBMITTED TO:
SIR HAFIZ GHUFRAN AHMAD
SUBMITED BY:
ATIF NAWAZ DAR.
MBA ^ (R)
FACULTY OF MANAGEMNET SCIENCES
INTERNATIONAL ISLAMIC UNIVERSITY ISLAMABAD
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ACKNOWLEDGEMENT:
First of all we are thankfuUo Allah Almighty for giving us the strength and
courage to complete this project. Secondly we would like to thank our course
instructor, Hafiz Ghufran Ahmad for for providing encouragement and much
needed support. We are also thankful to him for assigning us such_^n interesting
project with a lot of learning involved in It. The development of this project has
enabled us to understand the contents of this course in a better way. The project
has given us a practical experience, which will prove to be very beneficial in our
forth-coming practical life. And to our parents whose continuous prayers and
encouragement has enlightened our vision of this world.
TABLE OF CONTENTS
INTRODUCTION
•
What is a strategy?
•
What is strategic management?
•
Why strategic management?
•
What is strategic management process?
COMPANY PROFILE
COMPANY VISION
CHARACTERISTICS OF A VISION STATEMENT
ANALYSIS OF VISION STATEMENT
OBJECTIVES
"
•
Financial
•
Strategic
•
Long Term/Short term
•
Three Rules for Stating Objectives
DEFINING A COMPANY’S BUSINESS
STRATEGIC ANALYSIS
•
Analysis of target markets
•
Analysis of competencies
•
Analysis of competition and environment
THE INTERNAL ENVIRONMENT
Management
•
Planning
•
Organizing
•
Motivating
•
Staffing
•
Controlling
Marketing
•
Customer Analysis
•
Product and Service Planning
•
Pricing
•
Distribution
•
Marketing Research
•
Selling Products and Services
•
Opportunity Analysis
Finance
Production/Operations
THE EXTERNAL ENVIRONMENT
•
The External audit
•
Economic Forces
•
Social, Cultural, Demographic & Environmental Forces
•
Political, Governmental & Legal Forces
•
Technological Forces
•
Competitive Forces
•
Why do a situation analysis?
•
Porter’s ® Forces Model
•
Benchmarking & competitive Evaluation
•
Competitor Analysis
•
The External Factor Evaluation Matrix
•
The Competitive Profile Matrix
COMPETITIVE ADVANTAGE
•
Ways to win a competitive advantage
•
Competitive Strategy
Generic Competitive strategies
•
Low cost leadership strategy
•
Broad Differentiation strategy
•
Focused Low Cost strategy
•
Focused Differentiation strategy
'
BCG Growth Share Matrix
S W O T Analysis
T O W S MATRIX
The Value Chain Concept
THE STRATEGIES IN ACTION
.
INTEGRATION STRATEGIES
•
INTENSIVE STf^TEGIES
.
DIVERSIFICATION STRATEGIES
•
DEFENSIVE STRATEGIES
.
MICHEAL PORTERS GENERIC STRATEGIES
MEANS TO ACHIEVE STRATEGIES
MERGER/ACQUISITION
STRATEGY ANALYSIS AND CHOICE
Formulation Framework
Input Stage
Matching Stage
SPACE MATRIX
IE MATRIX
GRAND STRATEGY MATRIX
QSPM
Decision Stage
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INTRODUCTION
STRATEGY:
A STRATEGY CONSISTS OF COMPETETIVE MOVES &
BUSINESS APPROACHES TO PRODUCE SUCCESSFUL PERFORMANCES.
A strategy is a long term plan of action designed to achieve a particular goal.
Strategies express how the organization will meet the challenges that face it.
They set out how organizations will meet the challenge of providing better
services, often in innovative ways, to meet the rising expectations of the citizen.
Business strategies form the framework that enables the organization to cope
with the turbulence of the modern world, where priorities change suddenly,
uncertainty about the future is the norm, and the pace of change is everaccelerating. Alwarid might have to make different strategies in order to compete
with Mobilink U fohe and TelenorThe strategies made will depend upon the
intensity of the competition between the companies .Alwarid has direct
competition with all gsm companies so it will have to see what that company is
doing.
THE STRATEGY STATEMENT:
Answers the five questions of:
•
What should be our future driving force?
Profit might be a strong driving force however it might not be the one that
ensures the success of the company.The only thing that ensures the success of
the company in this era of intense competition is the level of customer
satisfaction that the company can ensure.
•
How does this differ from our current driving force?
The current driving force that comes to the mind for all the mobile phone service
providers is to increase the number of users. However in their race to increase
the number of users they have not taken into account the customer satisfaction
that has resulted in the decline of service quality standards.
•
What changes will be needed to meet the future driving force?
The companies must stop giving new connections & must now focus on providing
'such services to the existing customers that they can be fully satisfied.
•
How is this compatible with the mission?
The mission statement includes that the company aims at providing the best
quality services to its customers.
T C L E -C O W
CHARACTERISTICS OF STRATEGY-MAKING
ACTION-ORIENTED, concerning
•
WHAT to do e.g. to devise a strategy that may result in the maximum
consumer satisfaction.
•
WHEN to do it? As early as possible
•
WHO should be involved? Every management employee should be
involved so that no part of the organization is a stranger to it.
EVOLVES over time, responding to
•
Dynamics of competition e.g. when the competitors give a new scheme
the strategy might be needed to change.
•
Changing customer needs & expectations. With every passing day the
technological change is making the customers more advanced. Thus the
company has to keep up with it by introducing new devices accordingly.
•
Changes in costs. To be profitable, the company has to minimize its costs.
•
NEVER ENDING, resulting in finn’s actual strategy being a blend of its
•
INTENDED or PLANNED strategy
AS-NEEDED REACTIONS to new developments and unforeseen conditions
Elements of strategies:
Creating a strategy means clarifying, creating and refining the following
elements:
• Strategic vision:A blueprint for change, expressing the desired future for
the organization e.g. to be the most successful mobile phone company in
Pakistan its desired position in relation to its business environment. To be the
leader.
The outcomes it wishes to bring about - both within the organization and in its
dealing with customers. Maximum employee satisfaction within the organization
& maximum consumer satisfaction while dealing with the customers.
•
•
strategic issues: the challenges facing the organization.
international mobile phone service providers corning up to Pakistan
The
Strategic themes: the areas of business activity in which the organization
needs to engage to meet the challenges posed by strategic issues. The
provision of best and low cost service to the customers.
CORPORATE STRATEGY:
Formulated for company as a whole these may include the profit motive for the
company. It is fundamentally concerned with the selection of businesses in which
the fimn must compete and with the development of portfolio of those businesses.
These may include the profit seeking activities of the company.
BUSINESS STRATEGIES
Formulated for each separate business unit these may include how to generate
more and more cash out of the strategic business unit. These may pertain to the
application of various strategies to the separate business units.
FUNCTIONAL STRATEGIES
Formulated by functional-area managers within each business unit. These
may include the strategies pertaining to how to increase the functional
capabilities of the company.
OPERATING STRATEGIES
Formulated by plant managers, geographic unit managers, & lower-lever
managers. These may pertain to the operational area.
WHAT IS STRATEGIC MANAGEMENT?
IT IS THE ART & SCIENCE OF
FORMULATING, IMPLEMENTING & EVALUATING CROSS FUNCTIONAL
DECISIONS THAT ENABLE AN ORGANIZATION TO ACHIEVE
ITS
OBJECTIVES
The function of applying broad systematic management planning for the
organization. Includes the activities involved with the development, monitoring,
and reviewing of business plans, strategic plans, work plans, corporate plans,
Equal Employment Opportunity (EEO) plans, Ethnic Affairs Policy Statements
(EAPS) and agreements, energy and waste management plans and other long­
term organizational strategies. Also includes the development of the corporate
mission, objectives, continuous improvement processes, quality assurance and
certification, and the formulation and amendment of legislation which provides
the legislative basis for the organization
As this definition implies, strategic management focuses on integrating
management, marketing, finance, production, research & development to
achieve organizational success. Strategic management is a dynamic process of
aligning strategies, performance and business results; it is all about people,
leadership, technology and processes. Effective combination of these elements
will help with strategic direction and successful service delivery. It is a continuous
activity of setting and maintaining the strategic direction of the organization and
its business, and making decisions on a day-to-day basis to deal with changing
circumstances and the challenges of the business environment As part of your
strategic thinking about advancing the business, you (and your-partners) will
have set a course for a particular direction, but subsequent policy drivers (such
as new performance targets) or business drivers (such as increased demand for
services) could take the organization in a different direction. There could be
implications for accountability when you decide whether to take corrective action
to get back on course or to go with the new direction. Similarly, there could be
implications for governance if relationships with partners change. In Mobilink
there might be strategies regarding the marketing of a specified product, which
might be a new model of a mobile. If the organization wants to have a successful
launch, it must carefully design the whole process based on various sort of
Researches. The Company must carefully formulate, implement and evaluate the
strategies that it wants to use, thus enabling the organization to achieve the
desired objectives.
WHY STRATEGIC MANAGEMENT:
Your organization has to be able to respond effectively to challenges - both
problems and opportunities - as they arise. For example, the citizen has
increasing expectations of service standards and availability. In response,
organizations are working towards an outward-focused view of the way services
should be provided - a fundamental shift from the traditional focus on internal
concerns. At the same time, major opportunities for improvement may arise from
developments such as new information and communications technologies, and
the availability of additional financial resources such as the Invest to Save
Budget. In many cases the response to the problem or opportunity will:
•
require the continuous attention of senior management
•
affect most or all of the organization
•
have long term implications
•
require substantial resources
•
be interconnected with other issues and developments.
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Without strategy, the organization faces the risk of:
•
failing to deliver
•
unclear alms and objectives, making it hard, or impossible, to tell whether
the organization has been successful
•
fragmented decision-making: different areas of the organization work in
different ways; decisions are conflicting; it is hard to prioritize and review
projects and programmer
•
fragmented IT and communications (ICT) provision
•
people issues: staff question the value of their work, in the a&sence of an
understanding of how it contributes to the 'big picture'
•
lack of organizational learning; failures are repeated, lessons are not
learnt.
Who is involved in strategic management?
Key roles include:
•
senior executives and business managers in public sector organizations;
they need to seek out opportunities for new ways of working that will help
the organization to realize the agenda for change in the public sector; they
also need to be aware of the implications of realignment if the strategic
direction is changed
•
senior management responsible for reviewing and redefining the
requirements for delivery of core services, and for acquiring the means to
deliver them
•
staff responsible for developing and reviewing the business strategy in
their organizations; they need to appreciate the wider business context
partners and other stakeholders affected by the strategy.
W A R M
STAGES OF
s t r a t e g ic
MANAGEMENT:
Strategy formulation includes
•
Developing a vision and mission, in order to set definitive tasks in front.
•
Identifying external opportunities and threats these may include some new
inventions by the competitors, some environmental changes or some
changes by the government regarding policies.
•
Identifying internal strengths and weaknesses. These may include a
strong internal check and balance system.
•
Making Long Term objectives
•
Generating alternative strategies. This is very much important that the
company must have some alternative strategies that it may apply in case
a strategy fails to accomplish the desired results.
•
Selecting the strategies to pursue. The company may extract as many
strategies as possible but it has to choose among these those strategies
that it will pursue.
•
Functional strategies
•
Competitive strategies
•
Corporate strategies
Strategy implementation includes
• Establishing annual objectives. These objectives are short termed as
compared to the corporate objectives. These objectives are set,
achieved and are then reset.
• Devising Policies. The policies are set according to the annual
objectives.
• Motivating employees through leadership. Employees should be
motivated enough in order to accornplish the devised policies.
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• Allocating resources. Enough resources should be allocated to each of
the policies so that each of them can be accomplished successfully
and easily.
Process of evaluating:
• How the strategy has been implemented.
• Outcomes of the strategy. Outcomes of the strategy might or might not
be the desired ones. This is where the generation of alternative
strategies comes into action. If there is a failure after implementing a
strategy, the company should be able to have some alternative
strategies to go with.
Strategy Evaluation includes
•
Reviewing the internal and external factors that are bases for current
strategies. If there is a change in these factors then the strategy should be
altered.
•
Measuring performance. The enhancement or otherwise in - the
performance as a result of pursuing with the strategies should be noted.
•
Taking corrective actions if needed. If the desired results have not been
achieved then the corrective actions should be taken.
COMPANY PROFILE
Warid Telecom has implemented a new and modern corporate identity as a
result of the dynamic changes taking place in the telecom industry in Pakistan.
With a reflection of a new strategy, our aim is to be perceived not only as a
telecommunication operator of voice services, but also as a universal provider of
comprehensive communications services for both residential and business
customers. Warid's corporate identity seeks to reflect the changes in telecom
sector in relation to helping customers keep pace with rapidly changing
technology in the field of communication, and to harmonize the customers'
perception of our brand with the quality and range of pur services. Our objective
is to provide optimum level of support and care through our highly skilled and
motivated team of professionals and through maximum network coverage and
clear connectivity that we have committed to provide.
•V
'■
Warid Telecom takes pride in being baked by the Abu Dhabi Group, one of the
largest groups in the Middle East and the single largest foreign investor group in
Pakistan. It has a diversified business interest in the institutions that have
enjoyed commercial success as a result of it's strong financial resources and
extensive management expertise. The Abu Dhabi Group’s major investment are
in the following sector:
C l
*•
0.1 and Gas Exploration
Automobile Industry
Property Developnfient
Banking and financial
services
Hospitality Services
. Teleconfimunications
Warid Telecom decided to opt for GSM (Global System for Mobile
Communication) technology as It is the global standard for digital cellular
telephone service. GSM networks support enhanced data applications and more
than 't billion customers In i
countries are using this technology. Warid
Telecom would be launching its cellular services based on
* and
. GSM
technology, in order to optimize the utilization of frequency, thus ensuring the
highest quality and service.
The
Abu
Dhabi
Group's
Telecom
Businesses
include:
Waridlelecom
We have made no compromise on investments required for research * and
development. With a projected capital expenditure of over US
* • million, Warid
Telecom has been set up ^to provide a premium quality GSM service. The
Company will be operational in the
major cities of Pakistan at the time of
launch, and will cover most of the larger cities of Pakistan by summer of ^
WateenTelecom
With a projected capitalization of US
* million, Wateen Telecom plans to lay a
comprehensive telecommunication's infrastructure that would consist of:
•
International optical fiber network linking Pakistan with China, Central
Asia, Afghanistan, India and Iran.
•
VSAT transmission network with foot prints to cover Middle East, Asia &
parts of Europe in addition to Pakistan.
•
GHz wireless access network infrastructure in selected metros to
provide VOIP telephony, broadband internet and VPN/EDN solutions.
•
— km wholly owned nationwide optical fiber transmission network,
including optical fiber rings across the country
MESSAGE FROM THE CHAIRMAN
We are confident that like Abu Dhabi Group's hallmark in banking industry of
Pakistan, Warid & Wateen Telecom would not only reach out to every corner of
the country but will also set new trends and standards of providing the latest
technology, unparalleled quality service and customer care in . the
telecommunication industry of Pakistan.
The Abu Dhabi Group is led by His Highness Sheikh Nahayan Mabarak Al
Nahayan. His Highness is the Federal Minister for Education of the United Arab
Emirates. He is also the chairman of Wan'd Telecom, Wateen Telecom, United
Bank Limited, and is also the Founder Chairman of Bank Alfalah Limited.
VISION STATEMENT
The mission statement communicates the firm’s core ideology & visionary goals.
Mission statements are enduring statements of purpose that distinguish one
business from other similar firms.
Enduring statement of purpose
Distinguishes an organization from the other in the same enterprise
Establishes the organization’s reason for being
It consists of following three parts,
•
Core Values to which the firm is committed
•
Core Purpose of the firm
•
Visionary Goals that firm pursue to fulfill its mission
A STRATEGIC VISION
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o
Identifies activities firm intends to pursue
o
Sets forth long-term direction
o
Provides big picture perspective
A VISION STATEMENT should
•
Set firm apart from others
■ Arouse strong sense of organizational identity & business
purpose
Why is a VISION statement important?
•
To insure unanimity of purpose
•
To provide a basis for allocation of resources]
•
To serve as a focal point for individuals
•
To reconcile differences among stakeholders
,,
•
To resolve divergent views among managers
•
To arouse positive feelings about the firms
•
To provide a basis for goals and strategies
•
To provide directions
THE VISION STATEMENT:
^. What business should we be in?
Providing the best cellular phone services in the country
^. Why do we exist?
To achieve the highest level of customer satisfaction.
V. What is unique about our organization?
We are the largest mobile phone service provider in Pakistan.
i. Who are our principal customers?
The middle class of Pakistan
\:
•V T C L E C Q - M -
®. What are our principal products/services, present
and future?
The mobile phones with GSM technology.
1. What are our principal market segments, present
and future?
All those people who are using the mobile phone services.
V. What are our principal outlets/distribution channels,.
present and future?
The franchises that are spread all across the country.
How is our business different than it was three and
five years ago?
A.
There is a definite increase in the number of people using the cellular phone
service.
What
is
likely to
three and five years in the future?
be
different
about
our
business
With the ever increasing number of mobile phone users we will face a big
challenge of providing error free services to the customers.
^ •. What are our principal economic concerns?
With expenditures rising with every passing day, the company has to provide the
people with the cheapest possible mobile phone servces.
What
special
stakeholder groups?
considerations
do
we
Customers: Prices
Company: Profit
CHARACTERISTICS OF VISION STATEMENT:
Broad in scope
Generate range of feasible strategic alternatives
Not excessively specific
have
regarding
Reconcile interests among diverse stakeholders e.g. the company’s main interest
is its profit but it is not the only consideration that the company has to take into
consideration, thus its mission must allow for the various other stakeholders.
Finely balanced between specificity and generality
VISION STETEMENT:
Warid Telecom’s vision is
'To be the leading nationai communication
provider
with
a
strong
international
presence.”
Warid Telecom's brand values include:
•
Quality - the best available
•
Simplicity - easy and user friendly
•
Innovation - providing cutting edge technology arid solutions
•
Honesty - providing openness and fairness
•
Friendliness - sensitive to customer needs
Wan’d Telecom believes in working with strategic partners and employees for
long
term
relationships.
As a consequence of the above, Warid Telecom is looking for the following to
deliver its vision:
• Strategic vendors and partners to assist in rolling out these services in a
timely and efficient manner with a focus on turnkey solutions and premium
propositions
•
Strong partners to assist in launching these services and creating effective
sales & marketing / business development opportunities for all to
operationally and financially gain.Consultants and experts to help deliver
this vision
•
Well rounded employees who wish to become part of this adventure
ANALYSIS OF VISION STATEMENT
The
firm’s
vision
statement
represents a strong concern for the customers that it has to serve; it also
simplifies the job of the firm by specifying the markets that it has to serve. The
concern for profitability & growth is also there as it aims to create value for its
shareholders. The company has a strong concern for its employees. It gives us a
clear idea about the future make up of the firm and its vision of the next
•
years. It reflects management vision of what it wants to achieve and become .It
provides clear view of what firm is looking to achieve for its customers. It
indicates an intent to stake out a particular business position. This statement has
helped to know the v* major questions about the firm, i.e.
Who we are, what we do & where we are headed?
Answering these questions correctly helps the managers not to move in too
many directions, not to be so confused that the firm does not get to any direction.
A well-crafted vision statement
• Defines what the organization is
• Defines what the organization aspires to
be
• Distinguishes the firm from all others
• Serves as a frame work to evaluate current activities
OBJECTIVES:
These can be defined as specific results that an organization
seeks to achieve in pursuing its basic mission. Objectives can be long term or
short term.
•
.
•
Purpose of setting OBJECTIVES is to
•
Convert mission into performance targets
•
Create yardsticks to track performance
•
Establish performance goals requiring stretch
•
Push firm to be inventive, intentional, focused
Setting CHALLENGING but ACHIEVABLE objectives guards against
o
Complacency^
O
Drift
o
Internal confusion
o
Status quo performance
Objectives
o
Represent managerial commitment to achieve SPECIFIC &
MEASURABLE PERFORMANCE TARGETS by a certain time
o
Spell-out HOW MUCH of WHAT KIND of performance BY WHEN
o
Direct attention & energy to WHAT NEEDS TO BE
ACCOMPLISHED
Objectives serve two purposes
o
Substitute strategic decision-making for aimlessness over wliat to
accomplish
o Provide benchmarks for judging organizational performance
o Financial and Strategic objectives are set up to achieve the goals
as a whole.
LONG TERM/SHORT TERM OBJECTIVES:
•
SHORT-RANGE objectives
o Spell out near-term results to achieve
•
o
Indicate SPEED of progress & LEVEL OF PERFORMANCE being
aimed for
^
o
Serve as STAIR STEPS for reaching long-range performance
LONG-RANGE objectives
o Prompt actions NOW that will permit reaching targeted long-range
performance LATER
o
PUSH managers to weigh impact of today’s decisions on future
performance
Mobilink has set the following objectives,
STARTEGIC
• To be a major mobile phone service provider around the world
• To set the network in a way that is easily accessible for any individual
• To set up the customer services center for after sales service.
• To provide best quality service to the customers.
• Creation of value for the shareholders.
• To build a competitive environment for its employees
• Overtake rivals in quality or customer service
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• Achieve technological superiority
• Attain lower overall costs for rivals
FINANCIAL
• To increase earnings growth by ^
• Boost return on equity by ^
»X
^
• Achieve revenue growth of ^ • X per
• Increase earnings by ^
year
annually
• Increase dividends per share by
per year
^
• Increase net profit margins yX to
•
Boost annual returns on invested capital from >o'/, to ^
• Stronger bond and credit ratings
•
Recognition as a “blue chip” company
• A more diversified revenue base
•
Stable earnings during recessionary periods
RULES FOR STATING OBJECTIVES:
^. Quantifiable
Measurable
Realistic
i. Understandable
Challenging
. Hierarchal
V. Obtainable
A. Congruent
Time Line
W A R IE
BENEFITS OF CLEARLY SET OBJECTIVES;
•
Provide direction
•
Allow synergy
•
Aid in evaluation
•
Establish priorities
•
Reduce uncertainty
•
Minimize conflicts
•
Stimulate exertion
•
Aid in resource allocation
•
Aid in job design
DEFINING A COMPANY’S BUSINESS:
Three factors are to be considered,
Customer needs, WHAT is being satisfied?
Customer Groups, WHO is being satisfied?
Technology used & functions performed, HOW the needs are satisfied?
As far as the first question is concerned, the need for the cellular phones is
being satisfied which was not satisfied earlier. The answer to the second
question is that all those who can afford a cellular phone are being satisfied
according to the difference in their income levels. The latest technology has been
used in order to maximize the consumer satisfaction.
Looking outward at the customer need makes the business customer or market
driven.
Looking inward at technologies and functions makes a business specialized fully
integrated or partially integrated. As the mission of AL WARID suggests, its
business is spread all over Pakistan providing quality cellular phone services to
all those people who can afford them. AL WARID is the first company that
introduced V'. seconds call technology in Pakistan. It is still the largest mobile
phone provider in the country.
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THE STARTEGIC ANALYSIS:
An objective analysis and understanding of
your markets and your costs and capabilities forms the bedrock for the strategy
development process. From this analysis and by applying creativity will come a
number of options and opportunities that can be used to build and implement a
solid strategic plan for new or existing markets.
..
Setting a strategy requires knowledge In three areas:
Customer
Competencies
Competition
Customers: Existing customers and potential customers and markets. What do
they do? What would help them do what they do better? What are their needs?
Where are the most profitable customers?
Competencies: Skills, knowledge and relationships. What do you do well? What
abilities could you draw on? What costs do you have to carry? Where do you
make money?
Competitors:
Mobilink, Paktel, Ufone, Telenor,
Competition:
The whole competitive environment from regulation to real life competition. What
is the basis of competition? Where are the threats? Where is their pressure and
where Is the market easy?
Analysis of the three areas is interrelated. Who you choose as your target
audience will have implications for what capabilities you need, which will have an
impact on what competitive pressures are around which will influence who you
choose as your target audience.
Analysis of Target Markets:
^
One of the best starting points for strategic analysis is to look at who your key
target audiences and customers are and what they do and value. Once you
understand what your customers do and value, you can start to look for ways of
helping them do what they do better. Where "better" is as judged by your
customers, looking at what they value, not necessarily what you are good at.
The process of choosing a target audience can happen at two levels.
What existing customers do we have and what is their value to us (profit not
revenue)?
What customers could we have in the future if we chose to target untapped
nnarkets?
These demand-side views need to be matched against your capabilities and the
competitive environment to understand what costs would be involved to reap
these rewards.
Analysis of competencies:
Value-chain analysis
Competencies mean looking at your existing offerings and at strengths and
weaknesses. What are you good at? What could be improved? What can be
transferred to other markets? What can we do without?
Most companies are clear about what they do and what they do well (whether
this is clearly communicated to customers is another matter), but in terms of
strategic analysis it important to be systematic in assessing these competences.
There are many different frameworks for analysing the competencies of your
firm. For instance looking at tangible resources (finance, physical), intangible
resources (technology, reputation) and human resources (skills, flexibility). Or
McKinsey’s vs’s (skills, staff, style, shared values, systems, structure, strategy).
Our preference is to use a variation of Porter's value-chain analysis identifying
what is most valued by customers and who is providing this value. This means
looking at the product and service the customer receives in terms of what and
who provides:
• development/technical skills,
• procurement/production skills,
• sales/communication skills
• distribution/logistics skills
• service/support skills,
These skills and resources are often closely aligned to the customers view of
what they want and need and so you can Identify the key value points for your
customers.
A key feature of the value chain approach is that you do not have to be (and
perhaps shouldn’t be) good at all of these areas. Indeed, as there is a cost and
return associated with each skill for each of your products/services, this analysis
can start to identify which areas produce the greatest returns to your business.
It is also common that different customers value different elements. Consumers
may be drawn by a whizzy technical product, but for corporations logistical and
service skills may be valued more highly.
Relationships as assets:
Implicit within the value-chain idea is that companies should focus on their
strengths and the areas where they gain greatest returns, and should maybe be
outsourcing areas where they are weaker and where it would be more cost
effective to use outside help. Consequently, understanding existing
infrastructures, networks and identifying your key relationship assets that have a
strong influence over the value your customers perceive they are getting.
These relationships may or may not themselves be with customers. For instance
consultants who provide service/support skills, distributors providing logistics,
journals or magazines that provide communication with the market. Where these
relationships are adding value to your customers, you need to be developing and
partnering with these people and they are as valuable to your market strategy as
the customers themselves. '
Analysis of competition:
Competitive and environmental analysis of your markets should include all the
key influencing factors that affect the way in which you can compete. A
competitive review is important for two reasons.
Firstly, even if you know what the customers want and have the resources to
meet the customers’ demands, it may be that the competitive environment means
that it is not worth pursuing particular parts of the market for a whole range of
strategic reasons, such as the threat a price war, channel conflict, or legal or
ethical considerations.
^ ,
Secondly, you need to know if your competitors are doing things better than you
are, or more dangerously, whether they are looking to change the basis of
competition in the market, for instance by nnoving to a direct sales model, or by
introducing some revolutionary new product or technology.
THE INTERNAL ENVIRONMENT:
MANAGEMENT:
Management encompasses the following functions
Planning:
The only thing that is certain about any organization is change and
planning is the essential bridge between the present and future that increases
the likelihood of achieving the desired results.Planning is the process by which
any organization decides whether to attempt any task, works out the most
effective way of reaching the desired results.Planning is an up front investment in
success. It helps a fimn take maximum effect from a given effort.lt helps to avoid
the trap of working extremely hard and achieving little. The process of planning
must involve all managers and employees in a given organization.Planning can
have a positive impact on the organizational as well as individual performance.
Planning helps an organization to maximize an opportunity as well as minimize
the impact of any threat. Planning allows the firm to adapt to changing
environment & thus to shape its own destiny. Strategic management can be
viewed as a formal planning process that allows an organization to pursue
proactive rather than reactive strategies.
•
Start of the process
•
Bridge between present and Future
•
Increases likelihood of achieving desired results
ORGANIZING:
The purpose of organizing is to achieve coordinated effort by
defining task and authority relationships.Organizing means who does what and
who reports to whom. Delegating authority is an important organizing activity.
Employees are more educated and more capable of participating in
organizational decision making than ever before. The function of organizing can
be seen of consisting of, breaking tasks down into jobs, combining jobs to make
departments and delegating authority. Breaking tasks down into jobs requires the
development of job descriptions and job specifications. Combining jobs to form
department’s results in departmentalization span of control and a chain of
command.
•
Achieve coordinated effort
•
Defining task and authority relationships
•
Departmentalization
•
Delegation of authority
MOTIVATING:
Motivating can be defined as the process of influencing people to
accomplish specific goals. When managers and other employees of the fimn work
harder to achieve specific goals this means that the strategists of the firm are
good leaders.
MANAGEMENT AUDIT CHECKLIST OF QUESTIONS;
Does the firm use strategic management principles?
Are company objectives and goals well established and measurable?
Do managers at all hierarchical levels plan effectively?
Do managers delegate authority well?
Is the organization structure appropriate?
Are job description and Job specifications clear?
Is employee morale high?
i
Are employee turnover and absenteeism low?
Are organization reward and control systems effective?
MANAGEMENT
Stage When Most
Important
Function
Strategy Fonmulation
Planning
Organizing
>
Strategy Implementation
Motivating
Staffing
Controlling
Strategy Implementation
>
■>
Strategy Implementation
Strategy Evaluation
W
A R IE
.^•reLEGomMARKETING
Marketing can be defined as the process of defining
anticipating creating and fulfilling the needs of the customers for the products and
services. It consists of the following functions
Customer Analysis
It is the evaluation of customer needs desires and wants.
Successful organizations continuously examine the present as well as the future
needs of the customers. In case of mobilink, it has to analyze how many people
are in need of a mobile phone.
Selling Products/Service
Successful strategy implementation usually rests upon
the ability of an organization to sell a product or service. This is especially critical
when an organization pursues a market penetration strategy. The selling staff of
a company which is mobilink in our case plays a vital role in this regard.
Product\Service Planning
It includes activities such as test marketing, product
and brand positioning, packaging, product style & product quality. Since the
customer has many choices to choose from, the companies have to
provide the products of highest quality.
Pricing
Pricing your product or service is one of the^most important business
decisions you'll make. You must offer your products for a price your target market
is willing to pay-and one that produces a profit for your company-or you won’t be
in business for long
As a product moves through the distribution channels, e.g. from manufacturer to
distributor to dealer to customer, there are prices set along the way. The
manufacturer’s selling price to the distributor becomes the distributor’s cost. Is
that "cost" in line with competing products which the distributor might carry
instead? Is the cost low enough so that dealers will have enough margin in order
to want to carry the product? Obviously, it is important to understand pricing and
margins along the distribution path. Ultimately, the price to the consumer or last
purchaser in the chain must be such that it is competitive. Who sets this price?
Does the manufacturer or the dealer have the final say? Can the manufacturer in
any way control the price of his product when it hits the street (i.e. retail level)?
Most importantly, can the manufacturer make (or sub-contract) the product for a
cost to him which allows him to meet his profit objectives given the retail price
target?
There are various pricing strategies that you have probably heard about. For
example, markup pricing is the setting of a price based on one's cost. This may
be appropriate when reselling a product used in providing a service. For
example, an auto mechanic may mark up her cost of auto parts by ° • X. This may
be a simple way for her to determine selling price and from her experience this is
in line with what other mechanics are doing. However, it may be totally
inappropriate to set pricing based on cost in the case of a near-commodity item.
It should be noted that if you are constrained by both your pricing and costs, then
unless you are a particularly efficient operator, it may not make sense to be in
this business.
Another pricing strategy Is that of market "skimming". In this case, you start with
fairly high prices (especially in the absence of competition) and you lower your
prices over time as you start to keep up with the demand or as competition
begins to move in. What is your product "worth" to the buyer? Perhaps her
perception of what it is worth is very high. Ideally, you could start lowering prices
until you reach an optimal sales volume without oversupplying your market.
For so-called commodity products, a going-rate pricing approach is often
followed. If you are selling gasoline to motorists. It would be very difficult to
charge a price per litre or gallon which is noticeably different from that charged
by gas stations nearby. So unless you're the only station on a
• km stretch of
desert highway, you would likely charge the going-rate prices.
Currency is another important aspect for technology companies to consider.
Because'the markets for technology based products are usually global, you
should price your products in U.S. dollars, the currency used for international
trading. You might even consider pricing on an FOB (Free on Board) Destination
basis. For example, if I am selling optical encoders to machinery makers in
Germany, it might behoove me to price on an FOB Stuttgart basis. This means
that the German customer does not have to calculate freight, duty, etc. in order to
come up with a true landed cost. When I was selling video terminals in Germany
in the ^‘^V‘ 's, I priced in Deutschmarks, FOB Frankfurt. This meant that I was
taking more risk with respect to currency fluctuations, freight and insurance
charges, but by consolidating large volumes to Frankfurt, I was able to greatly
reduce air freight expenses thereby offering a competitive price to my
distributors.
There are many business ancl marketing theories on pricing. It is not possible to
do justice to this interesting and complex topic herein. The important thing to
remember is that this, perhaps next to the product itself, is one of the most
important P's of marketing. And you set it.
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LOW
High
Economy
Penetration
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Premiiim
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Pricing Strategies Matrix
DISTRIBUTION:
Placement if the product is crucial. There are often many
paths (i.e. channels) which a product can take in going from your shop to the
customer. A channel "map" can be drawn in order to visualize this keeping in
mind all the middlemen, agents, shops, stores, etc. along the way. Defining a
channel strategy is not simply an arbitrary matter. Bear in mind that all
middlemen along the way are, in essence, in partnership with you to sell
something to the end-user. Therefore, your product and its other p's must be
such that various resellers in your channel have their needs (e.g. margin
objectives, volumes) met.
There is also the question of control. When AES Data launched the world's first
word processor in the early ^ »'s, it signed up the Lanier company in the USA to
handle U.S. sales. However, Lanier was selling the AES product under its own
label, i.e. the Lanier name and when Lanier decided to switch to another supplier
of word processors (as competition emerged), AES had little control over its U.S.
customers. To gain a foothold in the U.S. market, it had to start from the
beginning in a market which it created! Even if Lanier sold the AES products
under the AES name, the channel would still be owned by Lanier in that Lanier
had its own loyal customer base along with sales and service offices to support
this customer base.
W A R IE
wTeL£C>0.?v«A choice of channels may also be dictated by cost constraints. If it is considered
too expensive and risky to advertise and promote a new product in an
established market, it may make more sense to go the Lanier route in which case
your partner will absorb the up-front sales expenses allowing you to concentrate
more on product development.
At the risk of oversimplifying, a good practical way to determine, or at least
analyze, appropriate channels for your product would be to start at the point of
final purchase. Who is the final consumer or user of your product? Where does
that person look when buying your type of product? If she buys this product from
an office products retail store, then where does that retailer obtain his products...
and so on. Once the various channels have been identified, it is easier to
determine which ones make the most sense or which ones offer the path of least
resistance.
The choice of channels may also have a significant bearing on pricing. For
example, in the AES/Lanier case, it was possible for AES to offer very attractive
pricing to Lanier because Lanier was absorbing the promotional and distribution
costs. This gave Lanier an incentive to focus on sales and marketing and not
compete with AES by also manufacturing such machines.
MARKETING RESEARCH:
It comprises of the systematic gathering ,recording
and analyzing of the data about problems related to the marketing of goods and
services.
OPPORTUNITY ANALYSIS:
It involves assessing the costs and benefits
associated with marketing decisions. We have to compare the total costs and
total benefits of a project.
MARKETING AUDIT CHECKLIST OF QUESTIONS:
Are markets segmented effectively?
Is the organization positioned well among the competitors?
W A R ! C
" TE Le CQiv;Is the market share of the firm increasing?
Are present channels of the firm cost effective and reliable?
Does the firm have an effective sales organization?
Does the firm conduct market research?
Are product quality and customer service good?
Are the products and services priced appropriately?
Does the firm has an effective promotion, advertising and publicity strategy?
Are marketing, planning and budgeting effective?
Do the marketing mangers have adequate experience and training?
F!NANCE\ACCOUNTING CHECKLIST OF QUESTIONS:
Where is the firm financially strong and weak as indicated by financial ratio
analysis?
Can the firm raise the needed short term capital?
Can the firm raise the needed long tenm capital either by debt or equity?
Does the firm have sufficient working capital?
Are capital budgeting procedures effective?
Are dividend payout policies reasonable?
PRODUCTION CHECKLIST OF QUESTIONS
Are suppliers of raw materials, sub assemblies & parts reasonable and reliable?
Are facilities, equipment, machinery and offices in good conditions?
Are inventory control policies and procedures effective?
Are quality control policies and procedures effective?
Are facilities,resources and markets strategically located?
Does the firm have technological competencies?
WT£t:£COm^
A R IE
THE EXTERNAL ENVIRONMENT:
ohtical Factors
omic Factors
cultural Factors
nological Factors
KEY QUESTIONS REGARDING EXTERNAL ENVIRONMENT:
• Industry’s dominant economic traits
• Competitive forces at work in industry & strength
• Drivers of change in industry
• Firms in strongest/weakest competitive positions
• Competitive moves of rivals
• Key factors detennining competitive success or failure in industry
• Attractiveness of industry
An Industry’s economic characteristics impose boundaries on the kinds of
strategic approaches a company can pursue!
IDENTIFYING AN INDUSTRY’S DOMINANT ECONOMIC TRAITS:
Market size & growth rate/stage in life cycle
Scope of competitive rivalry
Number of competitors & relative sizes
Prevalence of backward/fonward integration
Entry/exit barriers
•
Nature & pace of technological change
•
Product & customer characteristics
•
Scale economies & experience curve effects
•
Capacity utilization & capital requirements
•
Industry profitability
The company in our discussion i.e. Al warid has a big market size to target
and the growth rate of the market is also quiet high. The scope of competitive
rivalry is also very high because only that company can survive the tough
competition that provides the highest quality service. When each company is
striving hard to provide highest quality service, a healthy competition arises.
Mobilink is the largest selling mobile phone company in Pakistan having relatively
smaller competitors. There are no barriers.on the entry and exit of new
companies infact the competition is getting more severe by the day because of
the entry of some international competitors .The pace of the technological
change is very fast & the nature of the change can vary from very basic to the
most sophisticated. The amount of capital required is huge.Product
characteristics are continuously changing while the characteristics of the
consumers remain almost same. The industry profitability is high.
The external audit:
Identification and evaluation of trends and events beyond control of
single firm
• Increased foreign competition
• Populations shift
• Aging society
• Infomnation technology ^
• Computer revolution
Purpose:
Development of Finite List:
• Opportunities
• Threats to be avoided
ECONOMIC FORCES:
The economic condition of the country has not
been satisfactory. The inflation rate has been going up, where as the incomes
are not going up at the same pace. The population mainly consists of the middle
class who usually live from hand to mouth. The ultimate reason is that the
company has to offer the products at various prices so that all parts of population
can afford the facility. The value of Pakistani currency has been going down
which means lower imports and higher exports. The fluctuations in the value of
currency have significant and unequal effects on companies in different locations.
When the value of rupee falls against a currency, the goods within a country
seem to be expensive than before which means that companies have to give a
better offer in order to satisfy the customer needs. The costs incurred on set up
are very high but as we spoke earlier the incomes of the people are not that high
so the company has to set such competitive prices that suit both the company
and the customer. There is no barrier on the entry and exit for companies which
results in a very high competition. The closest competitor to Al warid are
Mobilink ,U fone, telenor,paktel gsm with Mobilink having more than a million
customers where as the closest U fone has around of a million. Another factor
that can be considered is that with the number of customers increasing, the
quality of service is also affected and thus the level of customer satisfaction is
also affected. With some international mobile phone service providers also
coming on the scene it will not be possible for the local companies to survive
without providing the highest quality and the competitive prices.
KEY ECONOMIC VARIABLES TO BE MONITORED
Availability of credit
Level of disposable incomes
Money market rates
Price fluctuations
Income differences
Stock market trends
Consumption patterns
SOCIAL, CULTURAL, DEMOGRAPHIC & ENVIRONMENTAL FORCES
These forces have a long lasting impact over all products, services,
market and customers. Small, large, profit & non profit organizations are being
staggered and challenged by the opportunities and threats arising due to
changes in these factors. The change in the age structure, change in cultural
values, change in laws regarding environmental factors have a lasting impact on
any company.AI warid has to consider each factor that can influence people in
Pakistan. These trends usually shape the way Pakistanis live, work, produce &
consume. New trends are creating a new kind of consumer and the companies In
turn will have to cope with the changing needs & wants. The age structure in
Pakistan has a large number of people who are between ages ^
^ these are
the individuals who are primarily targeted by Al warid.The other major segment
are the students who are or near to completing their degrees as they are going to
enter the work force soon. The company has to study the religious aspect of the
home country as well. As far as the social aspect is concerned, there has been a
trend that mobile phone usage has been used as a symbol. Thus Mobilink has hit
all sorts of the classes by providing various priced items. If there is a change in
the aging structure of Pakistan, it will affect each & every organization including
Al warid .The Company has to re establish the targets and it has to change the
major target market. The company has to take into account where the majority of
the population lives, in case of Pakistan Punjab is the biggest province according
to population. There is a trend in some European countries that the elderly
population is rising i.e. the people over
are rising as the percentage of total
population. If that is the case in Pakistan,Al warid has to consider it. The
environmental factors such as pollution, disruption, disturbance & places where
to use the mobile phone and where not to are to be considered by Al warid.No
greater threat to business and society exists than the voracious, continuous
decimation & degradation of our natural environment.
KEY FACTORS TO BE CONSIDERED:
Birth rates
Attitude towards work
Buying Habits
Racial Equality
Energy conservation
Pollution control
Ethical concerns
Social security programs
WTe^uecoM
A R I EPOLITICAL, GOVERNMENTAL & LEGAL FORCES:
Federal, state, local &
foreign governments are the major regulators, deregulators, subsidizers,
employers and customers of organizations. Political, governmental and legal
forces can thus represent major opportunities or threats for any organization. If
the Pakistani government decides to in crease the taxes regarding mobile phone
service providers then Alwarid will have to adapt to that. Similarly a government
going through nicely with some companies, if changed, then there might be some
different scenarios that a company will have to go through. Since the
bureaucracy Is very deeply rooted in the Pakistani society, Al warid will have to
coop with it as well. Political forecasting can be especially complex for
multinational firms. Some important variables that should be considered are
listed below:
Government regulations or deregulations
Changes in tax laws
Special Tariffs
Number of patents
Environmental protection laws
Level of government subsidies
Antitrust legislation
Government Fiscal & monetary policy changes
Lobbying activities.
Local, state & national elections.
COMPETITIVE FORCES:
Collecting and evaluating information about the
competitors is essential for successful operations Identifying major competitors is
not that easy because various divisions of a single organization may be
competing in different industries.
COMPETITIVE FORCES MATTER BECAUSE:
To be successful, strategy must be designed to cope effectively with
competitive pressures -Objective must be to build a strong, market Position
based on competitive advantage!
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Following are the key questions to be considered about the competitors
• What are the strengths of the major competitors?
• What are the weaknesses of the major competitors?
• What are the objectives and strategies of the major competitors?
• How will the major competitors react to the various trends affecting
our industry? ,
• How vulnerable are the major competitors to our alternative
strategies?
• How vulnerable are our strategies to successful counterattacks by
the competitors?
• How are our products and services positioned relative to
competitors?
- ,
• What key factors have resulted in our present position in the
industry?
W A R It
- T f LEG CIM
PORTER’S ® FORCES MODEL
THE FIVE COMPETITIVE FORCES
Threat o f new enlra nts
R h ^ li7 annong
existing
competit<XB
Bargaining power
o f suppliers
C
Bargaining power
of buyers
Threat o f substitute
producte or services
PROCEDURE: ANALYZING THE FIVE
COMPETITIVE FORCES
•
Identify main sources of competitive pressures
o
Rivalry among competitors e.g between mobilink and Ufone
o
Substitute products
o
Potential entry
o
Bargaining power of suppliers
o
Bargaining power of buyers
V: T.e^LECQ.^-.
V A RID
•
Assess strength of each competitive force
o
Strong? Moderate? Weak?
o Scale of ^ - ®: ' = weak; ®= strong
•
Explain how each competitive force works & its role in overall competitive
picture
RIVALRY AMONG COMPETING SELLERS:
•
Usually the MOST POWERFUL of the five competitive forces
.
Weapons of COMPETITIVE RIVALRY
o Price
o
Quality
o Performance features offered
o Customer service
o Warranties and guarantees
o
Advertising & special promotions
o
Dealer networks
o Product innovation
WHAT CAUSES RIVALRY TO BE STRONGER?
•
Lots of firms, equal in size and capability, exit
•
Demand for product growing slowly
•
Industry conditions tempt firms to use competitive weapons to boost
volume
,
•
Switching costs incurred by customers are low ^
•
A firm initiates moves to bolster its standing at expense of rivals
•
A successful strategic move carries a big payoff
•
Costs more to get out of business than to stay in
Firms have diverse strategies, corporate priorities, resources, & countries
of origin
COMPETITIVE FORCE OF POTENTIAL ENTRY:
•
•
•
New entrants boost competitive pressures
o
By bringing new production capacity into play
o
Through actions to build market share
Seriousness of threat of entry depends on
o
BARRIERS to entry
o
Expected REACTION of existing firms to entry
Barriers to entry exist WHEN
o
It is difficult for newcomers to enter market
o
A new entrant’s small sales volume puts it a price/cost
disadvantage
COMMON BARRIERS TO ENTRY:
Economies of scale
Inability to gain access to specialized technology
k'
Existence of learning/experience curve effects - ^
Brand preferences and customer loyalty
Capita! requirements
Cost disadvantages independent of size
Access to distribution channels
WAR IE
•
Regulatory policies
•
Tariffs & international trade restrictions
REACTION OF EXISTING FIRMS CAN BE AN ENTRY BARRIER:
•
•
WHEN existing firms
o
Indicate they’ll aggressively defend their position
o
Have substantial resources to wage defense
o
Can use leverage with customers to keep their business
THEN potential entrants likely to be discouraged by
o Prospects of a costly struggle
o Strong threat of competitive retaliation
•
WHICH makes entry barriers HIGHER
WHEN IS POTENTIAL ENTRY A STRONG COMPETITIVE
FORCE?
Competitive threat of outsiders entering a market is stronger when
•
Entry barriers are low
,
•
Incumbent firms do not vigorously fight newcomer
•
Newcomer can expect to eam attractive profits
^
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low
High
tow, ^stable
returns
Low, risky
returns
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Higfi, stable
ill
returns
High, risky
returns
Low
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COMPETITIVE FORCE OF SUBSTITUTE PRODUCTS:
SUBSTITUTES matter when products of firms in another Industry
enter the market picture:
•
Eyeglasses vs. Contact Lens
•
Sugar vs. Artificial Sweeteners
•
Plastic Containers vs. Glass vs. Tin vs. Aluminum
•
Aspirin vs. Other Types of Pain Relievers
COMPETITIVE FORCE OF SUPPLIERS:
•
Suppliers are a strong competitive force when *
o Item makes up large portion of costs of product, is crucial to
production process, and/or significantly affects product quality
o It is costly for buyers to switch suppliers ^
o They have good reputations & growing demand for their product
o
They can supply a component cheaper than industry members can
make it themselves
o They do not have to contend with substitutes
o
Buying firms are not important customers
o
Concentrated suppliers, fragmented buyers
o
Little substitution threat
o
Customer is not an important buyer
o
Supplier’s product is important input
o
High buyer switching costs
o
Suppliers pose threat of forward integration
o
Government - defense, timber, regulation
COMPETITIVE FORCE OF BUYERS:
•
Buyers are a strong competitive force when
o
They are large & purchase a sizable percentage of industry's
product
o
They buy in volume quantities
o
They incur low costs in switching to substitutes
o
They have flexibility to purchase from several sellers
o
Selling industry’s product is standardized
o
They can integrate backward
o
Product being purchased does NOT save buyer money or has low
value to buyer
o
Concentrated or large volume sales
o
Purchased products are a significant fraction of buyer’s costs
o
Products are standard or undifferentiated
o
There are few switching costs
o
Low profits - pressure on suppliers
o
Buyers pose threat of backward integration
o
Buyer has full information
COMPETITOR ANALYSIS:
•
A firm’s strategic moves are affected by '
o
Current strategies of competitors
o Actions competitors are likely to take next
•
Profile of key competitors involves studying;
o
Current position in industry
o Strategic objectives & recent actions
o
Basic competitive approaches
Benchmarking is used to ascertain how well you are doing against the
competition. Are there areas that you can learn from the competition? Are there
ideas in markets outside your own that would be worth bringing into your market
to give you a competitive advantage?
Your competitors can also be a source for information about the general market.
Their advertising and marketing is telling you something about the messages and
approaches that they think are applicable to your market. If they have done their
research, you can learn from their approaches.
One common issue that comes from looking at the competition is what do you do
about it? The options are:
m / m i c
- T^LEC'QM
•
Ignore
•
Fight
•
Adopt
In practice, if there is merit in something new and you ignore it, it is likely to bite
you later. If you fight against it, you add to your costs potentially just to save
market share, rather than to win market share.
Consequently often adoption of the competition’s good ideas is the best way
forward (although perhaps after a little fighting to test whether the ideas are
sound). Microsoft’s Embrace and Extend and Intel's "Only the Paranoid Survive"
are good examples of companies that use the competition to keep their products
at the cutting edge.
. '
Often there can internal cultural issues that mean this can be difficult to accept.
But learning from the competition, doesn't mean following the competition. This
approach, known as an "invest in your threats’’ strategy, can be an extremely
effective way of keeping up with and ahead of the market.
COMPETITOR ANALYSIS:
•
Successful strategists take great pains in scouting competitors by
•
Understanding their strategies
•
Watching their actions
•
Evaluating their vulnerability to driving forces & competitive pressures
•
Sizing up their strengths & weaknesses
•
Trying to anticipate rivals’ next moves
PINPOINTING INDUSTRY KEY SUCCESS FACTORS:
.
KEY SUCCESS FACTORS (KSFs) spell difference between
o
Profit & loss
W A R IE
o
Competitive success or failure
A KEY SUCCESS FACTOR can be .
o Specific skill or talent
o
Competitive capability
o
Something a firm must do to satisfy customers
Industry Analysis: The External Factor Evaluation (EFE) Matrix
SUMMARIZE & EVALUATE
Economic
Demographic
Governmental
Social
Environmental
Technological
Cultural
Political
Competitive
-- T S 'L - E .C Q - 'M ^
MOBILINK
KEY EXTERNAL
FACTORS
WEIGHT
RATING
Globa! MOBILE
PHONE market
expected to grow
v.X In
r
Cost of MOBILES
expected to
decrease by ^ ‘ /
r
Strong industrial
rivalry
r
Severe price
cutting in Mobile
Industry
V
Income of people
is going down
•A
^ .
WEIGHTED
SCORE
--i,-
Weights are based on the firm ratings while the ratings are based on the industry
evaluation.
COMPETITIVE ADVANTAGE
•
•
COMPETITIVE ADVANTAGE exists when firm has an edge in
o
Defending against competitive forces &
o
Securing customer
Convince customers firm’s product/service offers SUPERIOR VALUE
o
Offer buyers a good product at a lower price
o
Use differentiation to provide a better product buyers think is worth
a premium price
WAYS TO WIN A COWIPETETIVE ADVANTAGE:
Become the low-cost producer
Make the best-made product
Provide customer more value for the money
Save customer money
Provide superior customer service
Enhance perfomfiance buyer gets
Provide more convenient locations
Make a more reliable & durable product
RESOURCE
IMPLICATIONS
Valuable
Neutralize threats .exploit opportunities
Rare
Not many fimis possess
Difficult to substitute
No equivalent strategic resource
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COMPETITIVE STRATEGY:
•
COMPETITIVE STRATEGY consists of moves to
o
Attract customers
i
o Withstand competitive pressures
o Strengthen firm’s market position
.
OBJECTIVES
o Earn a COMPETITIVE ADVANTAGE
o Cultivate clientele of LOYAL CUSTOMERS
o Knock the socks off rivals, ethically & honorably
•
COMPETITIVE STRATEGY, narrower in scope than business strategy,
focuses on management’s plan to compete successfully
LOW-COST LEADERSHIP:
Striving to be the overall low-cost provider in industry '
•
Open up a sustainable cost advantage over rivals, using lower-cost edge
as basis to
o
Under price rivals
&
reap market share gains OR
o Earn higher profit margin selling at going price
o
Low-cost leadership means low OVERALL costs, not just low
manufacturing or production costs
o
Sustained capital investments
o Process engineering skills
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o Products designed for ease in manufacture
o
Low cost distribution system
o
Tight cost control
o Frequent, detailed reports
o
Incentives based on quantitative targets
’
WAR IC
CHARACTERISTICS OF A LOW-COST PROVIDER
•
Cost conscious organizational culture
•
Spartan facilities
•
Limited perks & frills for executives
•
Intolerance of waste
•
intensive screening pf budget requests
•
Employee participation in cost control efforts
BROAD DIFFERENTIATION:
Striving to build customer loyalty by differentiating one’s product offerings from
rivals’ products
Incorporate differentiating features to cause buyers to prefer firm’s
product/service over rivals’ brand
Find ways to differentiate to CREATE VALUE for buyers that are NOT
EASILY COPIED by rivals
Not spending more to differentiate than price premium to be charged
Strong marketing abilities
Product engineering & creative flair
Strong research & function coordination
Reputation for quality or leadership
Subjective incentives & measurements '
Amenities to attract high-caliber people
FOCUS: Above, directed at specific target
Successful differentiation allows firm to
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Command a premium price and/or
•
Increase unit sales and/or
•
Build brand loyalty
APPROACHES TO DIFFERENTIATION:
•
Different taste - Dr. Pepper
•
Superior service - Federal Express
•
Spare parts availability - Caterpillar
•
More for your money - McDonald’s, Wal-Mart
•
Engineering design & performance - Mercedes
•
Prestige - Rolex
•
Quality - Honda automobiles
•
Top-of-the-line image - Ralph Lauren
•
Technological leadership - ^M Corporation
•
Unconditional satisfaction - L.L. Bean
FOCUS STRATEGY BASED ON LOW COST:
Concentrating on a nan^ow buyer segment, out-competing rivals on basis of lower
cost. The problem will be to_offer a large number of benefits to the customers
remaining within the lower costs.
FOCUS STRATEGY BASED ON DIFFERENTIATION:
V-
Offering niche members a product or service customized to their needs
•
Do a better job of serving buyers in target market niche than rivals i.e. to
provide a better level of service to the customers, to offer a relatively lower
price to them. In case of mobile phones a company can offer more facilities
as compared to its competitors.
•
Choose a market niche where buyers have distinctive preferences, special
requirements, or unique needs e.g. a company can focus the business
class & provide it with the any time access to the internet.
Develop a unique ability to serve needs of target buyer segment e.g.
GPRS
BCG MATRIX
Two variables used:
INDUSTRY GROWTH RATE
•
Plotted on vertical axis
t . RELATIVE MARKET SHARE
•
Plotted on horizontal axis
CONSTRUCTING A BCG GROWTH-SHARE fWATRIX
INDUSTRY GROWTH RATE
•
“High growth” businesses are in industries growing faster than economy
•
“Low growth” businesses are in industries growing slower than economy
.
RELATIVE MARKET SHARE
•
o
Calculated by dividing firm’s market share by market share of firm’s
largest rival
■ .
o
“Typical” dividing line between “high” and “low” relative market
share businesses placed at about .vo or .a
o
Businesses on left are market share leaders
o
Businesses on right are in below-average relative market share
positions
Each business is a “bubble” with size scaled to portion of total corporate
revenues generated
QUESTION MARKS I PROBLEM CHILDREN / CASH HOGS
Internal cash flows are inadequate to fund needs for working capital & new
capital investment
•
Operate in a high growth market but have low relative market share -Upper right cell of matrix
•
Rapid industry market growth makes businesses attractive, but low
relative share positions raise questions about future potential
•
Cash needs are high & internal cash generation Is low, making them cash
hogs
STARS:
Star businesses
•
Have strong competitive positions in rapidly growing industries
•
Are major contributors to corporate revenue & profit growth
•
May or may not be cash hogs
CASH COWS:
,
•
Situated in low growth market but have high relative market share - Lower
left cell of matrix
•
Can generate cash surpluses over & above that needed for reinvestment
& growth in business
•
Valuable portfolio holding because they can be “milked” for cash to
o
Pay corporate dividends & overhead
o Finance new acquisitions
o
Invest in young stars or problem children'
As far as the company in discussion i.e.mobilink is concerned, we can safely say
that it is a cash cow providing the industry with cash necessary to keep the things
going.lt is also the strongest company of the whole industry.
DOGS:
•
Situated in low growth market & have low relative market share -- Lower
right cell of matrix
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Have weak competitive position & low profit potential
Unable to generate attractive cash flows on a long-term basis
STRATEGY IMPLICATIONS OF GROWTH-SHARE MATRIX
•
Draws attention to cash flow & investment characteristics of various types
of businesses
•
Encourages strategists to view diversified firm as collection of cash flows
& cash requirements
•
Explains why priorities for corporate resource allocation can be different
for each business
•
Success sequence -- Question mark to young star to self-supporting star
to cash cow
•
Two disaster sequences
o Stiar’s position erodes to problem child & then falls to a dog
o Cash cow loses leadership & becomes a dog
Tfe LESQrvl
High
Relative Market Share Position
Low
Medium
•.0
Stars
II
Cash Cows
HI
Question Marks
I
Dogs
IV
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S W O T represents the first letter in
o
S trengths
o
W eaknesses
o
O pportunities
.
o T hreats
SWOT analysis involves sizing-up firm’s
,
o
INTERNAL strengths & weaknesses and^
o
EXTERNAL opportunities & threats
A STRENGTH Is something firm Is good at or characteristic giving it an
important capability
o
Useful skill
o
Important know-how
o
Valuable organizational resource or competitive capability
o
Achievement giving firm a market advantage
A WEAKNESS is something firm lacks, does poorly, or condition placing it
at a disadvantage
A company’s Internal strengths usually represent COMPETITIVE
ASSETS; Its Internal weaknesses usually represent COMPETITIVE
LIABILITIES. The desired condition is for the assets to OUTWEIGH the
liabilities by a hefty margin!
OPPORTUNITIES most relevant to a fimn are factors in EXTERNAL
environment offering
o Some kind of competitive advahtage
o Important avenues for growth
The Limitations of SWOT Analysis:
• Strengths may not lead to an advantage
• SWOTs focus on the external environment is too narrow
• SWOT gives a one-shot view of a moving target
• SWOT overemphasizes a single dimension of strategy
IDENTIFYING EXTERNAL THREATS:
•
EXTERNAL FACTORS posing a danger to firm
o
Emergence of cheaper technologies e.g. GPRS
o
Introduction of new/better products by rivals e.g. better quality by
Telenor
o
Entry of low-cost foreign competitors e.g. Telenor & Varid
o
New regulations
o
Vulnerability to rise in Interest rates
o
Potential of hostile takeover
o
Unfavorable demographic shifts e.g. the shift in the urban
population towards the
o
Adverse shifts in foreign exchange rates e.g. the fall in the value of
money.
KEY QUESTIONS ANSWERED BY SWOT ANALYSIS
o
Does firm have internal strengths an attractive strategy can be built
on?
o
Which weaknesses does strategy need to correct?
o Do firm’s weaknesses disqualify it from pursuing certain
opportunities?
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o
Which opportunities does firm have resources to pursue with a
chance of success?
o What threats should firm worry most about?
T O W S MATRIX:
The TOWS Matrix (Figure 6-3)
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SO Strategies
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(if
.
V
V
.
.
.
S.
Use the internal strengths to tal<e advantage of external
WO Strategies Improve internal weaknesses to take advantage of external
opportunities
ST Strategies Using internal strengths to minimize the impacts of external
threats
WT Strategies Defensive tactics to prevent internal weaknesses and reduce
external threats
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THE VALUE CHAIN CONCEPT:
.
A VALUE CHAIN identifies:
o Activities, functions, & business processes tlnat liave to be
performed in o Designing, producing, marketing, delivering, & supporting a product
or service
•
A VALUE CHAIN consists of two major types of activities
•
PRIMARY ACTIVITIES that create value for customers. E.g. the mobile
phone services of Mobilink.
.
RELATED SUPPORT ACTIVITIES
Primary Activities:
Associated with receiving, storing and distributing inputs to the product
• Location of distribution facilities
• Material and inventory control systems
• Systems to reduce time to send “returns” to suppliers
• Warehouse layout and designs
Associated with collecting, storing, and distributing the product or service to
buyers
•
Effective shipping processes
•
Efficient finished goods warehousing processes
•
Shipping of goods in large lot sizes
•
Quality material handling equipment
W A R IE
Associated with purchases of products and services by end users and the
inducements used to get therh to make purchases
• Highly motivated and competent sales force
• Innovative approaches to promotion and advertising
• Selection of most appropriate distribution channels
f
• Proper identification of customer segments and needs
• Effective pricing strategies
Associated with providing service to enhance or maintain the value of the product
• Effective use of procedures to solicit customer feedback and to act
on information
• Quick response to customer needs and emergencies
• Ability to furnish replacement parts
• Effective management of parts and equipment inventory
• Quality of service personnel and ongoing training
• Warranty and guarantee policies
Support Activities:
Typically supports the entire value chain and not individual activities
•Effective planning systems
•Ability of top management to anticipate and act on key environmental trends and
events
•Ability to obtain low-cost funds for capital expenditures and working capital
•Excellent relationships with diverse stakeholder groups
•Ability to coordinate and integrate activities across the value chain
•Highly visible to inculcate organizational culture, reputation, and values
Activities involved in the recruiting, hiring, training, development, and
compensation of all types of personnel
•
Effective recruiting, development, and retention mechanisms for
employees
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Quality relations with trade unions
Quality work environment to maximize overall employee
performance and minimize absenteeism
Reward and incentive programs to motivate all employees
Related to a wide range of activities and those embodied In processes and
equipment and the product itself
•
Effective R&D activities for process and product initiatives
•
Positive collaborative relationships between R&D and other
departments
• State-of-the art facilities and equipment
• Culture to enhance creativity and innovation
•
Excellent professional qualifications of personnel
• Ability to meet critical deadlines .
Function of purchasing Inputs used in the finn’s value chain
• Procurement of raw material inputs
• Development of collaborative “win-win” relationships with suppliers
•
Effective procedures to purchase advertising and media services
•
Analysis and selection of alternate sources of inputs to minimize
dependence on one supplier
•
Ability to make proper lease versus buy decisions
THE STRATEGIES IN ACTION
INTENSIVE STRATEGIES
•
Growth via Market Penetration (Concentration)
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• Growth via Market Development
• Growth via Product Development
• Growth via Diversification
o
Related (“Concentric”) Diversification
o Unrelated (“Conglomerate”) Diversification
MARKET PENETRATION (Same Products, Same Markets)
• When current markets
products/services
are
not
saturated
with
your
particular
• When the usage rate of present customers could be significantly
increased .By giving the incentives like low call rates and more night time
Mobilink is trying to increase the usage rate of the present customers.
• When the market shares of some major competitors have been declining
while total industry demand has been rising
• When the correlation between sales and marketing expenditures has
historically been high .In the present Era there has been a very much
increased expenditure on advertising by Mobilink.
•V
• When increased
advantages
economies
of scale
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1
provide
major
competitive
MARKET DEVELOPMENT (Same Products, New Markets)
•
When an organization is very successful at what it does .Mobilink has
successfully launched its mobile phone service all across Pakistan.
•
When new untapped or unsaturated markets exist. The large portion of the
population of Pakistan that does not possess the mobile phone.
•
When the firm has the needed capital and human resources to manage
expanded operations Mobilink is the largest mobile phone company in
Pakistan so it has the resources to expand further.
•
When an organization has excess production capacity .With
the
expanded operations the inflow of cash will also increase which will result
in an increase in production capacity.
When an organization’s basic industry is rapidly becoming global in scope.
With the Introduction-of some international competitors like Telenor &
Varid, the mobile phone Industry of Pakistan is excessively becoming
global.
PRODUCT DEVELOPMENT (New Products, Same Markets)
•
When the firm has successful products that are in the maturity stage of the
product life cycle (I.e., attract satisfied customers to try new, improved
products as a result of their prior experiences). In case of MobilInk we can
say that the mobile phones that it has been preparing are now lying in a
maturity stage and it can now afford to start a launch of a new product.
•
When an organization competes in an industry that is characterized by
rapid technological change .Mobile phone industry is one of those that are
most rapidly affected by a technological change.
•
When major competitors offer better quality products at comparable
prices. UFone is offering an additional GPRS facility with the same price
range.
•
When the firm competes In a high-growth industry The mobile phone
industry is a very fast growing one because the number of customers is
very large.
•
When an organization has especially strong research and development
capabilities
WHEN DOES DIVERSIFICATION START TO MAKE SENSE?
WHEN to DIVERSIFY depends on
•
Firm’s competitive position AND
Remaining opportunities in home-base industry
•
Strong competitive position, rapid market growth - Not a good time to
diversify
•
Strong competitive position, slow market growth - Diversification is top
priority consideration
•
Weak competitive position, rapid market growth - Not a good time to
diversify
•
Weak competitive position, slow market growth - Diversification merits
consideration
DIVERSIFICATION STRATEGIES
•
Entering new industries
•
Related diversification
•
Unrelated diversification
.
Divestiture & liquidation
•
Corporate turnaround, retrenchment, & restructuring
Multinational diversification
WHAT IS RELATED DIVERSIFICATION?
Diversification is RELATED when a firm has several lines of business that,
although distinct, possess some kind of STRATEGIC FIT
COMMON APPROACHES TO RELATED DIVERSIFICATION
•
Entering businesses where sales force, advertising, & distribution activities
can be shared
•
Exploiting closely related technologies
•
Sharing manufacturing facilities
•
Transferring know-how & expertise from one business to another
•
Transferring firm’s brand name & reputation with customers to a new
product/service
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Acquiring new businesses to uniquely help fimri's position in existing
businesses
WHAT IS UNRELATED DIVERSIFICATION?
•
•
Unrelated diversification involves NO
o
Common linkage of strategic fit among a diversified firm’s lines of
business
o
Meaningful value chain interrelationships
Corporate strategy approach
o
•
Venture Into “any industry & any business in which we think we can
make a profit”
Firms pursuing unrelated diversification are referred to as
CONGLOMERATES
o
NO unifying strategic theme
•
Is there potential for union difficulties or adverse government regulations?
•
Is industry vulnerable to recession, Inflation, high interest rates, or shifts in
government policy?
ATTRACTIVE ACQUISITION TARGETS
•
Companies with undervalued assets
o
•
Capital gains may be realized
^
Companies that are financially distressed
o
•
.
May be purchased at bargain prices
Companies with bright prospects, but limited capital
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•
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Situations arise when one or more subsidiaries have to be sold or shut
down
o
Misfits cannot be completely avoided
o
Industry attractiveness changes over time
o
Diversification appearing sensible based on strategic fit lacks
compatibility of values essential to CULTURAL FIT
DIVESTITURE & LIQUIDATION STRATEGY OPTIONS
•
Two types of divestiture options
o
Divest business by spinning it off as independent company
o
Divest business by selling it
• Liquidation
o
Most painful option
,
o Involves terminating firm’s existence
STRATEGY ANALYSIS AND CHOICE:
Strategic analysis and choice largely involves making subjective decisions based
on objective infonnation
• Establishing long-term objectives
• Generating alternative strategies
• Selecting strategies to pursue
ft
•
,
Best alternative to achieve mission and objectives
INPUT STAGE:
•
Provides basic input Information for the matching and decision stage
matrices
•
Requires strategists to quantify subjectivity early In the process
•
Good intuitive judgment always needed
*
T.e^LE.cQ.tv^Matching Stage:
Match between organization’s internal resources and skills and the opportunities
and risks created by its external factors.
SPACE MATRIX
Strategic Position and Action Evaluation Matrix
■ Four quadrant framework
■ Determines appropriate strategies
■ Aggressive
■ Conservative
■ Defensive
■ Competitive
Two Internal Dimensions
■ Financial Strength [PS]
■ Competitive Advantage [CA]
Two External Dimensions
■ Environmental Stability [ES]
■ Industry Strength [IS]
Overall Strategic position determined by:
-
-
Financial Strength [FS]
-
Competitive Advantage [CA]
-
Environmental Stability [ES]
-
Industry Strength [IS]
'
^
Select variables to define FS, CA, ES, & IS
,
-
Assign numerical ranking from
Assign numerical ranking from
(worst) to
(best) to
(best) for FS and IS;
(worst) for ES and CA.
-
Compute average score for FS, CA, ES, & IS
-
Plot the average scores on the Matrix
-
Add the two scores on the x-axis and plot point on X. Add the scores on
the y-axis and plot Y. Plot the intersection of the new xy point.
-
Draw a directional vector from origin through the new intersection point.
SPACE FACTORS
Internal strategic position
position
External strategic
Financial strength
Environmental stability
Return on investment
Technological changes
Leverage
Rate of inflation
Liquidity
Demand variability
Working Capital
Cash Flow
COMPETETIVE ADVANTAGE
Barriers to entry
Price elasticity of Demand
INDUSTRY STRENGTH
Market share
Growth potential
Product life cycle
Profit potential
Product quality
Financial Stability
Customer loyalty
Capital intensity
QSPM:
Quantitative Strategic Planning Matrix
Only technique designed to determine the relative attractiveness of feasible
alternative actions
• Tool for objective evaluation of alternative strategies
• Based on identified external and internal crucial success factors
• Requires good intuitive judgment
•
List the firm’s key external opportunities & threats; list the firm’s key
internal strengths and weaknesses
Assign weights to each external and internal critical success factor
> Examine the matrices and identify alternative strategies that the
organization should consider implementing
> Determine the Attractiveness Scores (AS)
• Compute the total Attractiveness Scores
• Compute the Sum Total Attractiveness Score
Limitations:
• Requires intuitive judgments and educated assumptions
• Only as good as the prerequisite inputs
POSITIVES;
•
Sets of strategies examined simultaneously or sequentially
Requires the integration of pertinent external and internal factors in the
decision-making process
GRAND STRATEGY MATRIX:
•
Popular tool for formulating alternative strategies
•
All organizations (or divisions) can be positioned in one of four quadrants
•
Based on two evaluative dimensions:
-
Competitive position
-
Market growth
Quadrant
Excellent strategic position
Concentration on current markets and products
Take risks aggressively when necessary
Quadrant
Evaluate present approach seriously
'
How to change to improve competitiveness
Rapid market grovrth requires intensive strategy
Quadrant
Compete in slow-growth industries
Weak competitive position
Drastic changes quickly
Cost and asset reduction indicated (retrenchment)
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Quadrant IV
Strong competitive position
Slow-growth industry
Diversification indicated to more promising growth areas
The Network
We are partners with some of the leading vendors in the telecom industry who
help in providing the best and the latest network solutions for our businesses.
These vendors include cellular giants Ericsson, Nortel, Siemens, Cisco and
Huawei.
Warid has pioneered in key technologies which include the following:
Custom-made network for Pakistan's environment
Congestion-free connectivity in all coverage areas
Roll out plan for complete national populated coverage by ^
"
Fully redundant network
Robust design catering to future needs
Future professional network (EDGE compatible and
switch and media gateway architecture)
upgraded with soft
> ■*
State of the art IP based contact center and leading data center
Launch of WIMax services across Pakistan by the end of ^ w i t h
revolutionary
GHz broadband solution
Services Beyond Comparison
Customers are the most important element in any organization. We distinguish
them as our biggest assets, and we strive for excellence by listening to their
needs. We work with our customers to gain an understanding of their business,
their goals and their objectives, to ensure that they receive the best possible
service and the right solutions to meet their demands.
We seek to be trendsetters in customer service, with our ’one stop' concept for all
your telecom requirements. This will be achieved with the provision of a one
window operation for on-the-spot issue resolution and one stop service. We have
the maximum number of Sales and Customer Service Centers countrywide, with
two state-of-the-art Contact Centers of international standards, equipped with
cutting edge technologies to ensure reakime online services. Our highly trained
and well-groomed team of Customer Service Executives are on hand ^ - hours to
provide support. We have established Corporate Lounges, with a customerfriendly environment to provide personalized care to our esteemed corporate
clients. Furthermore, an extensive network of franchises, kiosks and mobile units
ensure easy and convenient accessibility.
Innovation
Warid is committed to providing superior levels of professional services to all its
customers - before, during and after the deployment of our leading solutions. To
accommodate our customer's demands, we have deployed a state-of-the-art ^
G EDGE compliant network. There are also innovative services of various
standards that cater to a wide spectrum of users.
Best Practices
We believe in a process driven setup with comprehensive business processes
covering all our activities. All business processes are ETOM compliant as per
accredited international standards.