ดร. ว ท ร เจ ยมจ ตต ตรง. Source: strategic Management on internet

ดร. ว ท ร เจ ยมจ ตต ตรง Source: strategic Management on internet

Business Opportunity A business opportunity is a consumer need or want that can potentially be met by a new business. 2

Sources of Opportunity Sources of opportunities include: Problems. Many well-known companies were started because an entrepreneur wanted to solve a problem. Changes. Our world is continually changing. Change often produces needs or wants that no one is currently meeting. New Discoveries. The creation of totally new products and services can happen by accident. Existing Products and Services. You can get ideas for opportunities from businesses that already exist by looking for ways to improve a product significantly. Unique Knowledge. Entrepreneurs sometimes turn one-of-a-kind experiences or uncommon knowledge into a product or service that benefits others. 3

Thinking Creatively Creative thinking is a thought process that involves looking at a situation or object in new ways. Challenge the Usual. Ask lots of Why? and What if? questions. Think Backward. Start by imagining the end result you want. Be Flexible. Force yourself to examine things from different angles. Judge Later. When brainstorming ideas, don t worry about being practical. Draw Idea Maps. Use whiteboards, chalkboards, and poster boards to sketch out ideas. Brainstorm in a Group. Ask your friends, family, and classmates to help you generate ideas. Daydream. Letting your mind wander is okay; just make sure you pick an appropriate time. 4

Testing Business Ideas 1. What is my customer profile? 2. What am I replacing? 3. How do I demonstrate this idea to others? 4. Who will I need on my team? 5. What resources do I need? 6. How long will my purchasing cycle be? 7. What's a reasonable sales forecast? 8. How much growth potential does my idea offer? 9. Do I possess the necessary skills? 10. Can I see myself doing this for the next two years? 5

Turning Ideas into Opportunities Four common ways to turn ideas into opportunities are: Starting a new business Buying an independent business Buying a franchise Becoming an inventor 6

Evaluating an Opportunity The feasibility of an idea refers to how possible or worthwhile it is to pursue it, to see if it is actually an opportunity. Three methods for determining the feasibility of business ideas are: Cost/Benefit Analysis. This is the process of adding up all the expected benefits of an opportunity and subtracting all the expected costs. If the benefits outweigh the costs, the opportunity may be worthwhile. Opportunity-Cost Analysis. An opportunity-cost analysis examines the potential benefits that you forfeit when you choose one course of action over others. SWOT Analysis. This is a business evaluation method that draws its name from the four areas it evaluates Strengths, Weaknesses, Opportunities, and Threats. 7

Business Plan Risk Product risk is the risk that the product can't be created. Market risk is the risk that the market will develop differently than expected. Sometimes markets take too long to develop, and cash runs out while a company is waiting for customers. People risk is big in companies that depend on having certain employees or certain kinds of employees. Financial risk is the risk that a company will run out of money or mismanage their money in some way. Competitive risk is the risk that a competing product or service will be able to win 8

Competitive Advantage How a firm can actually create and sustain a competitive advantage in its industry? An industry s profit potential is largely determined by the intensity of competitive rivalry within that industry. 9

Porter s Five Forces

Threat of New Entrants Economies of Scale Product Differentiation Capital Requirements Switching Costs Access to Distribution Channels Cost Disadvantages Independent of Scale Government Policy

Bargaining Power of Suppliers Supplier industry is dominated by a few firms Suppliers products have few substitutes Buyer is not an important customer to supplier Suppliers product is an important input to buyers product Suppliers products are differentiated Suppliers products have high switching costs Supplier poses credible threat of forward integration

Bargaining Power of Buyers Buyers are concentrated or purchases are large relative to seller s sales Purchase accounts for a significant fraction of supplier s sales Products are undifferentiated Buyers face few switching costs Buyers industry earns low profits Buyer presents a credible threat of backward integration Product unimportant to quality Buyer has full information

Threat of Substitute Products Products with improving price/performance tradeoffs relative to present industry products Example: Electronic security systems in place of security guards Fax machines in place of overnight mail delivery

Rivalry Among Existing Competitors Jockeying for strategic position Using price competition Staging advertising battles Increasing consumer warranties or service Making new product introductions

Force Bargaining power of suppliers Bargaining power of buyers Threat of new entrants Threat of substitutes Profitability will be higher if: Weak suppliers Weak buyers High entry barriers Few possible substitutes Profitability will be lower if: Strong suppliers Strong buyers Low entry barriers Many possible substitutes Competitive rivalry Little rivalry Intense rivalry

Based on Porter s 5 Forces, generic strategy, and value chain frameworks In which industry should the organization compete? (Use Porter s 5 Forces Model) Which generic strategy to use? (Use Porter s Generic Strategy Framework) How to configure the value chain to support the strategy? (Use the value chain analysis framework)

Firm Infrastructure Supporting Activities Human Resource Management Technology Development Procurement Margin Primary Activities Inbound Logistics Operations Outbound Logistics Marketing and Sales Service All Right Reserved by 18

According to Porter, competitive advantage, and thus higher profits will result either from: Differentiation of products (distinctive, more product features) and selling them at a premium price, OR Producing products at a lower price than competitors

In association with choosing differentiation or cost leadership, the organization must decide between: Targeting the whole market with the chosen strategy, OR Targeting a specific segment of the market

Low cost Differentiation Strategic Scope Broad Narrow Cost leadership Differentiation Cost focus Differentiation focus NOTE: If 2 or more competitors choose the same box, competition will increase

Higher profits resulting from charging prices below that of competitors, because unit costs are lower Increase market share and sales by reducing the price below that charged by competitors (assuming price elasticity of demand) Ability to enter new markets by charging lower prices Is a barrier to entry for competitors trying to enter the industry

Analysis of the value chain identifies where cost savings can be made in the various parts and links

With a cost leadership strategy, the value chain must be organized to: Reduce per unit costs by copying, rather than original design, using cheaper resources, producing basic products, reducing labor costs and increasing labor productivity Achieve economies of scale by high-volume sales Using high-volume purchasing to get discounts Locating where costs are low

Cost leadership strategy is best used in a market or segment when demand is price elastic, OR When charging a similar price to competitors at the same time as increasing advertising to increase sales

Products will get a premium price Demand for products is less price elastic than that for competitor s products It is an additional barrier to entry for competitors to enter the industry

Analysis of the value chain identifies in what parts of the chain and through which links superior products can be created and customer perception may be changed

With differentiation strategy, the value chain must be organized to: Create products that are superior to competitors products in design, technology, performance, etc. Offer superior after-sales service Have superior distribution channels Create a strong brand name Create distinctive or superior packaging

Differentiation strategy, properly used, can: reduce price elasticity of demand for the product lead to the ability to charge higher prices than competitors, without reducing sales volume lead to above average profits compared to sales

Focus strategy targets a segment of the product market, rather than the whole market or many markets Segment is determined by the bases for segmentation, i.e., geographic, psychographic, demographic, behavioral characteristics Within the segment, either cost leadership or differentiation strategy is used

Lower investment costs required compared to a strategy aimed at the entire market or many markets It allows for specialization and greater knowledge It makes entry into a new market more simple

Low cost Differentiation Strategic Scope Broad Narrow Cost leadership Ryan Air, Walmart Cost focus Differentiation McDonalds, BMW Differentiation focus Ferrari, Rolls Royce

Based on the idea that a strategy can be successful by using a mix of differentiation, price and cost leadership Example: Toyota

Firm Infrastructure Supporting Activities Human Resource Management Technology Development Procurement Margin Primary Activities Inbound Logistics Operations Outbound Logistics Marketing and Sales Service All Right Reserved by 40

Outbound Logistics Collecting, storing and distributing the product to buyers Marketing and Sales Providing a means and incentive which allow buyers to purchase the product Service Providing service to enhance or maintain the value of the product All Right Reserved by 42

Four scopes may affect value chain Ex. The value chain serves minicomputer requires extensive sales assistance, less hardware performance different from what serves small business All Right Reserved by 46

Human Resources Management (1%) Firm Infrastructure (16%) Procurement (2%) Technology Development(2%) (8%) Liquid Assets (6%) (15%) Fixed Assets (38%) Service (2%) (2%) (5%) Inbound Logistics Operations (67%) Outbound Logistics (1%) All Right Reserved by Marketing & Sales (1%) 53

Economies or diseconomies of scale Learning and spillover Pattern of capacity utilization When fixed cost high, capacity utilization is important Linkages How other activities are performed Linkages within the Value Chain Vertical Linkages All Right Reserved by 56

Reconfiguration of the value chain presents the opportunity to fundamentally restructure a firm s cost, compared to settling for incremental improvements. By altering the basis of competition in a way that favors a firm s strengths, it may change the important cost drivers in a way that favors a firm. All Right Reserved by 65

1. Identify the appropriate value chain and assign costs and assets to it. 2. Diagnose the cost drivers of each value activity and how they interact. 3. Identify competitor value chains, and determine the relative cost of competitors and the sources of cost differences. 4. Develop a strategy to lower relative cost position through controlling cost drivers or reconfiguring the value chain and/or downstream value. All Right Reserved by 66

Emphasize on a unique source of differentiation in the Value Chain, rather than on products or markets only Differentiation base on buyers value, not only difference that buyers do not value Should consider the cost of differentiation All Right Reserved by 68

Interrelationship Sharing a value activity with sister business units. E.g., sharing a sales force for both insurance and other financial products Proprietary learning Integration e.g., integrating online systems to current ordering systems Scale Institutional factors e.g., Madame s route All Right Reserved by 72

1. Determine who the real buyer is 2. Identify the buyer s value chain and the firm s impact on it 3. Determine ranked buyer purchasing criteria 4. Assess the existing and potential sources of uniqueness in a firm s value chain All Right Reserved by 75

5. Identify the cost of existing and potential sources of differentiation 6. Choose the configuration of value activities that creates the most valuable differentiation for the buyer relative to cost of differentiating 7. Test the chosen differentiation strategy for sustainability 8. Reduce cost in activities that do not affect the chosen forms of differentiation All Right Reserved by 76