Business Policy

1
Business Policy Strategy Chapter Five

• Current Issues in
• Strategic Management
• Murdick, Moor, Babson Tomlinson, Sixth Edition,
  2000

2
Current Issues

• Review company vision
• Review company mission
• Industry Analysis one tool is the
• FIVE FORCES model developed by Michael Porter, a
  Harvard Business School Professor

3
Porters Five Forcessee ingrid
4
Porters Five Forces

• Power of suppliers of key inputs are there many
  suppliers who can provide what the firm needs, if
  so, their power is relatively low alternatively,
  few suppliers increases their power over the
  firm
• Power of buyers-many buyers have low power few
  customers buying large quantities from the firm
  increases the customers power more than one
  buyer group

5
Porters Five Forces

• Threat of new entrants-profitable growing
  industries tend to attract new players high
  rivalry among firms discourages entrants, also
  consider barriers to entry
• Threat of substitute products/services new
  methods of accomplishing the same outcome (e.g.
  contact lenses as a substitute for eye glasses),
  how likely is this to occur?
• Rivalry among firms the stronger it is, the
  higher the level of competition and retaliation
  by other firms

6
Globalization

• Internationalization can help firms reduce their
  costs (labor, raw materials, shipping), increase
  their market share, achieve economies of scale,
  or defend themselves against their rivals.
• Regional trade agreements such as NAFTA, EU,
  MERCOSUR, and ASEAN have forced firms to locate
  plants in each of those areas.

7
Benchmarking

• Deming Juran- two Americans working in Japan
  who increased the attention to details and
  developed a culture of doing things right along
  the production process the first time. Quality
  inspection rather than inspection AFTER the
  product is made.

8
Quality

• US National Quality Award is known as the Malcolm
  Baldrige National Quality Award. It may be
  awarded annually in these categories small
  business, production, services, health care and
  education. There are seven major criteria for
  earning this award. Many firms get the criteria
  as a form of measurement when they dont really
  intend to apply.

9
US Malcolm Baldrige National Quality Award

• Quality week is celebrated each October
• The US does not have a winner in each category
  every year
• We have selected winners that have subsequently
  gone out of business
• Does tend to increase consistency among the final
  product or service

10
ISO Certification

• Another measure of consistency in production is
  the International Standards Organizations
  certification. It can be achieved in various
  levels such as 9000, 9001, 14000, etc. for firms
  that can document processes and procedures with
  planning in all areas of operations.

11
Outsourcing

• Generally done to reduce costs although it also
  allows firms to focus on their core activities.
• Nike and Reebok are major firms that outsource
  almost all activities other than accounting,
  marketing, and corporate activities. They award
  short-term production contracts to Asian
  producers but are still highly criticized for
  their sweat shops.

12
Culture

• Five dimensions identified by Hofstede in a large
  study of IBM employees.
• Individual-collective do people from a nation
  prefer to work alone or in groups?
• Masculinity-femininity masculine cultures tend
  to be aggressive, competitive and very
  egotistical while highly feminine cultures are
  nurturing, cooperation, and supportive of others
  efforts.

13
Culture

• Power distance the degree to which people
  accept differences in status among the workforce.
  Is it an informal relationship with the manager
  or great distances and formality?
• Uncertainty avoidance how do people feel about
  risk taking? Do they like to know what will
  happen?
• Time orientation past, present or future
  orientation? Do the people tend to have a
  short-term or long-term time orientation as they
  consider alternatives?

14
Mergers Acquisitions

• Over 3 TRILLION dollars of mergers and
  acquisitions occurred in 1999.
• Almost half of these deals have not met their
  goals or are unsuccessful.
• Examples include Quaker Oats bought Snapple for
  1.7B in 1994 and sold it three years later for a
  mere 300M
• Another example is when ATT bought NCR in 1991
  for 7.4B and sold it in 1995 for only 3.4B!