Business growth and strategy

6 6Business GrowthBusiness Growthand Strategyand Strategyn nStrategic managementStrategic managementstrategic and day-to-day managementstrategic and day-to-day managementthe components of strategic managementthe components of strategic managementFFstrategic analysisstrategic analysisFFstrategic choicestrategic choiceFFstrategic implementationstrategic implementationn nImportance of the business environmentImportance of the business environmentPEST analysisPEST analysisStrategic AnalysisStrategic AnalysisStrategic AnalysisStrategic Analysisn nPorters five forces modelPorters five forces modelthe five forcesthe five forcesFFthe bargaining power of suppliersthe bargaining power of suppliersFFthe bargaining power of buyersthe bargaining power of buyersFFthe threat of potential new entrantsthe threat of potential new entrantsFFthe threat of substitutesthe threat of substitutesFFthe extent of competitive rivalrythe extent of competitive rivalryIndustry competitors Porters Five Forces ModelPorters Five Forces ModelSource:Michael E.Porter Competitive Strategy:Techniques for Analyzing Industries and Competitors,(The Free Press,1980)Industry competitorsRivalry amongexisting firmsPorters Five Forces ModelPorters Five Forces ModelSource:Michael E.Porter Competitive Strategy:Techniques for Analyzing Industries and Competitors,(The Free Press,1980)PotentialentrantsIndustry competitorsRivalry amongexisting firmsThreat ofnew entrantsPorters Five Forces ModelPorters Five Forces ModelSource:Michael E.Porter Competitive Strategy:Techniques for Analyzing Industries and Competitors,(The Free Press,1980)SubstituteproductsPotentialentrantsIndustry competitorsRivalry amongexisting firmsThreat ofnew entrantsThreat ofsubstitutesPorters Five Forces ModelPorters Five Forces ModelSource:Michael E.Porter Competitive Strategy:Techniques for Analyzing Industries and Competitors,(The Free Press,1980)SuppliersSubstituteproductsPotentialentrantsIndustry competitorsRivalry amongexisting firmsThreat ofnew entrantsBargaining powerof suppliersThreat ofsubstitutesPorters Five Forces ModelPorters Five Forces ModelSource:Michael E.Porter Competitive Strategy:Techniques for Analyzing Industries and Competitors,(The Free Press,1980)BuyersSuppliersSubstituteproductsPotentialentrantsIndustry competitorsRivalry amongexisting firmsThreat ofnew entrantsBargaining powerof suppliersBargaining powerof buyersThreat ofsubstitutesPorters Five Forces ModelPorters Five Forces ModelSource:Michael E.Porter Competitive Strategy:Techniques for Analyzing Industries and Competitors,(The Free Press,1980)Strategic AnalysisStrategic Analysisn nPorters five forces modelPorters five forces modelthe five forcesthe five forcesFFthe bargaining power of suppliersthe bargaining power of suppliersFFthe bargaining power of buyersthe bargaining power of buyersFFthe threat of potential new entrantsthe threat of potential new entrantsFFthe threat of substitutesthe threat of substitutesFFthe extent of competitive rivalrythe extent of competitive rivalryfactors affecting each of the forcesfactors affecting each of the forcesStrategic AnalysisStrategic Analysisn nPorters five forces modelPorters five forces modelthe five forcesthe five forcesFFthe bargaining power of suppliersthe bargaining power of suppliersFFthe bargaining power of buyersthe bargaining power of buyersFFthe threat of potential new entrantsthe threat of potential new entrantsFFthe threat of substitutesthe threat of substitutesFFthe extent of competitive rivalrythe extent of competitive rivalryfactors affecting each of the forcesfactors affecting each of the forceslimitations of the five forces modellimitations of the five forces modelStrategic AnalysisStrategic Analysisn nValue chain analysisValue chain analysisnature of value chain analysisnature of value chain analysisprimary activitiesprimary activitiesFFinbound logisticsinbound logisticsFFoperationsoperationsFFoutbound logisticsoutbound logisticsFFmarketing and salesmarketing and salesFFserviceservicesecondary activitiessecondary activitiesFFprocurementprocurementFFtechnological developmenttechnological developmentFFhuman resources managementhuman resources managementFFfirm infrastructurefirm infrastructureInboundlogisticsThe value chainThe value chainOperationsOutboundlogisticsMarketingand salesAfter-salesserviceFirminfrastructureTechnologicaldevelopmentHuman resourcemanagementProcurementStrategic ChoiceStrategic Choicen nEnvironment or market-based strategyEnvironment or market-based strategytypestypesFFcost leadershipcost leadershipFFdifferentiationdifferentiationFFfocusfocusimportance of establishing:-importance of establishing:-FFthe basis of a firms competitive advantagesthe basis of a firms competitive advantagesFFthe nature of the target marketthe nature of the target marketn nResource-based strategyResource-based strategyexploiting core competenciesexploiting core competenciesdefining&establishing core competenciesdefining&establishing core competenciesn nGrowth by internal expansionGrowth by internal expansionproduct differentiationproduct differentiationvertical integrationvertical integrationdiversificationdiversificationn nGrowth by external expansion:mergers Growth by external expansion:mergers and takeoversand takeovershorizontal mergershorizontal mergersvertical mergersvertical mergersconglomerate mergersconglomerate mergersGrowth StrategyGrowth StrategyAlternative growth strategyAlternative growth strategyGROWTH OF A FIRMInternal expansionExternal expansion(1)DifferentiationHorizontal expansion(same product,increasein market share)(1)Horizontal integrationMergers of firmsproducing the sameproduct(2)Vertical integrationDifferent products,butbelonging to different stages of same product(2)Vertical integrationMergers of firms producing at different stages of same process(3)ConglomerateDiversification-introduction of totally different products(3)ConglomerateDiversification-merger of firms producing totally unrelated productsGrowth StrategyGrowth Strategyn nGrowth by internal expansionGrowth by internal expansionfinancing internal growthfinancing internal growthFFborrowingborrowingFFshare issueshare issueFFploughing-back profitploughing-back profitFFthethe takeover takeover constraint constraintGrowth StrategyGrowth Strategyn nGrowth by internal expansion(cont.)Growth by internal expansion(cont.)growth through vertical integrationgrowth through vertical integrationFFbackward integration(upstream integration)backward integration(upstream integration)FFforward integration(downstream integration)forward integration(downstream integration)why vertically integrate?why vertically integrate?FFeconomies of scaleeconomies of scaleFFreduced uncertaintyreduced uncertaintyFFmonopoly powermonopoly power barriers to entrybarriers to entrygrowth through diversificationgrowth through diversificationFFadvantagesadvantages when existing market is saturatedwhen existing market is saturated spreads risksspreads risksGrowth StrategyGrowth Strategyn nGrowth through mergers and takeoversGrowth through mergers and takeoverstypes of merger and takeovertypes of merger and takeoverFFhorizontalhorizontalFFverticalverticalFFconglomerateconglomeratemotives for mergers and takeoversmotives for mergers and takeoversFFgrowthgrowthFFeconomies of scaleeconomies of scaleFFmonopoly powermonopoly powerFFincreased market valuationincreased market valuationFFreduced uncertaintyreduced uncertaintyFFother motivesother motiveseffects of mergers on consumerseffects of mergers on consumersFinancing Growth and InvestmentFinancing Growth and Investmentn nSources of business financeSources of business financeinternal sourcesinternal sourcesFFploughed-back profitploughed-back profitexternal sources external sources FFbanksbanks mainly short-and medium-term financemainly short-and medium-term financeFFstock marketstock market longer-term financelonger-term financeFFproblem of short-termismproblem of short-termisminternational sourcesinternational sourcesn nThe role of the Stock ExchangeThe role of the Stock Exchangeprimary marketprimary marketsecondary marketsecondary marketadvantagesadvantagesFFbrings together savers&firms seeking financebrings together savers&firms seeking financeFFregulates firms and helps encourage confidenceregulates firms and helps encourage confidenceFFfacilitates mergers and takeoversfacilitates mergers and takeoversFFreduces transaction costs of investment financereduces transaction costs of investment financedisadvantagesdisadvantagesFFcost of getting listedcost of getting listedFFpossible short-termism and instabilitypossible short-termism and instabilityFinancing Growth and InvestmentFinancing Growth and Investmentn nIs the stock market efficient?Is the stock market efficient?the efficient market hypothesisthe efficient market hypothesisFFshare prices reflect information about share prices reflect information about companies current and expected future companies current and expected future performanceperformanceimplications of stock market efficiencyimplications of stock market efficiencyFFbenefit of speculation diminishes as efficiency benefit of speculation diminishes as efficiency increasesincreasesFFperfect efficiency and share prices following a perfect efficiency and share prices following a random walkrandom walkFinancing Growth and InvestmentFinancing Growth and InvestmentStaying SmallStaying Smalln nEU definition of SMEsEU definition of SMEsby number of employeesby number of employeesFFmicro enterprisesmicro enterprisesFFsmall enterprisessmall enterprisesFFmedium enterprisesmedium enterprisesby turnoverby turnoverEU SME definitionsEU SME definitionsEU SME definitionsEU SME definitionsEU SME definitionsEU SME definitionsEU SME definitionsEU SME definitionsStaying SmallStaying Smalln nCompetitive advantage and small firmsCompetitive advantage and small firmsflexibilityflexibilityquality of servicequality of serviceproduction efficiency and low overheadsproduction efficiency and low overheadsproduct development and innovationproduct development and innovationn nProblems facing small businessesProblems facing small businessesselling and marketingselling and marketingfunding R&Dfunding R&Dmanagement skillsmanagement skillsless ability to gain economies of scaleless ability to gain economies of scale