150 Business Diagrams by Jonas Lindblom

150 Business Diagrams...

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Key Words... Break-even – Financing Life Cycle – Economies of Scale – Elasticity – Sales Cycles – Market Potential – Portfolio Matrix – Product Model – Four P’s – Push/Pull Strategy – Marketing Mix – PDCA Cycle – SWOT – Value Chain – Ansoff Matrix – BCG Matrix – 7-S Model – Core Competencies – GE Business Screen – Nine Cell Industry – Risk/Reward Diagram – Porter’s Five Forces – Industry Competition – Generic Strategies – Geobusiness Model – Porter’s Diamond – Matrix Design – PIMS – Leavitt’s Diamond – Belbin’s Team Roles – Theory X/Y – Maslow’s Hierarchy – Herzberg’s Theory – Cultural Web – Pareto Curve – CIM Concept – Value Drivers Powered by www.drawpack.com; All rights reserved.

Markets and Structure of Flow Resources

Resources

Resource markets

Money

Taxes, goods

Services, money

Manufacturer markets

Taxes, goods

Government markets

Services, money

Money Goods and services

Taxes Services

Taxes, goods

Middlemen markets

Money

Money Goods and services

Consumer markets

A Company‘s Macroenvironment

MACROENVIRONMENT IMMEDIATE INDUSTRY & COMPETITVE ENVIRONMENT Suppliers

Substitute

COMPANY Rival Firms

Buyers New Entrants

The Economy at large

Break-even Point Value $ Sales Profit

Break-even Point Variable costs

Current sales level

Total costs

Fixed costs

0 0

Units sold

Break-even Chart 1200

Dollars (in thousands)

Total revenue 1000

Target profit Total cost

800

600

400

Fixed cost 200

Break-even Volume 35

Total Revenue

$ Millions

Total Costs

20 15

Fixed Expenses*

5 0 50

Profit

Loss

100 Break-even Volume (90,000)

* Fixed Expenses = Marketing Expenses and Other Direct Expenses

150

200 Units Sold (â&#x20AC;&#x2DC;000)

Break-even Regions

Cash flow Returned capital break-even

Cumulative revenue

Cash flow breakeven

$ EVA break-even

Opportunity cost based on capital risk assumed

P&L break-even

Financing Life Cycle Venture Capitalist

FFF & Angels

Seed Capital & Early Stage

Early Growth

Enterprise Cash Flow

Investment Banks & Banks

Later Growth

Mezzanine 3rd

Public Market

2nd

Initial Public Offering

1st

Valley of Death

Break-even point

Emerging Growth

Time

Enterprise Financing

Demand and Supply

Price

A S

Quantity

Average cost

Economies of Scale

LACs*

Output *Long-run average costs (LACs) Increasing returns to scale, or economies of scale

Price

e=-

Price

Elasticity e = 0 (total inelastic demand)

e<-1 e=(total elastic demand)

e=-1

e>-1

Quantity

e=0

P1 (-)

Price

Quantity

P2 Price

P1 (+)

(-) P2 (+)

Quantity

Demand is elastic and expenditure increases when price falls from P1 to P2

Quantity

Demand is inelastic and expenditure increases when price falls from P1 to P2

Price

Inelastic and Elastic Demand

P’2

P’1

Q2 Q1

Q’2

Q’1

Quantity Demanded per Period

(a) Inelastic demand

(b) Elastic demand

Sales and Profit Life Cycles

Sales and Profits ($)

Sales

Profit

Introduction

Growth

Maturity

Time

Decline

Market Potential, Market Volume, Market Share Volume or value

Market potential Market volume

Market share

Time

Sales over profits

The Product Life Cycle I

Sales

Profits Introduction

Growth

Maturiy

Shake-out

Stages over Time

Decline

The Product Life Cycle II

Unit Sales Volume

Introduction

Growth A B C

Maturity

Commodity or Decline

Time Note: A = Moderate Growth, B = Commodity, C = Decline

The Life Cycle Portfolio Matrix THE BUSINESS UNIT‘S COMPETITIVE POSITION Strong Average Weak

Development A C Growth

D THE INDUSTRY‘S STAGE IN THE EVOLUTIONARY LIFE CYCLE

Competitive shakeout

F E

Maturity Saturation G H Decline

Patterns of Strategic Change

Continuity

Incremental

Flux

Global

The Whole Product Model

Potential Product Augmented Product Expected Product Generic Product

The Product-Positioning Map High quality

E A

Low price

High price

C D

Low quality

The Four Pâ&#x20AC;&#x2DC;s of McCarthy I Environment

Product Place

Price Promotion

Environment

The Four Pâ&#x20AC;&#x2DC;s of McCarthy II High quality Marketing Mix Product variety Quality Design Product Features Brand name Packaging Sizes Services Warranties Returns

Place

Channels Coverage Assortments Locations Inventory Transport

Target Market

Price

Promotion

List price Discounts Allowances Low quality Payment period Credit terms

Sales promotion Advertising Salesforce Public relations Direct marketing

Push versus Pull Strategy

Marketing activities Push Strategy

Demand

Manufacturer

Intermediaries

End users

Demand

Marketing activities Demand

Demand Pull Strategy

Manufacturer

Intermediaries

End users

The Expanded Marketing Mix

Product

Price

Promotion

Customer Service People

Place

Processes

The 6 â&#x20AC;&#x201C; Step Marketing Plan 1

Situation (SWOT)

Action plan

firm market industry competition environment

Objectives sales market share market expansion leadership satisfaction

budget allocation product promotion price distribution

Marketing Plan

Strategy segment â&#x20AC;&#x201C; target price / quality product positioning differentiation diversification

Forecasts

quantify: costs sales profits market share Control

organization structure measurement tools check frequency => Corrective actions

The PDCA Cycle

Performance

Plan

Act

Check

Path of continous improvement

Time

Enterprise Management Process Decision Process

Enterprise Structure

Mission & Strategy

Customer Satisfaction

Value Improvement

Enterprise Learning Benchmarking

SWOT Analysis Diagram Numerous environmental opportunities

Cell 3: Supports a turnaroundoriented strategy

Cell 1: Supports an aggressive strategy

Substantial internal strengths

Critical internal weaknesses Cell 4: Supports a defensive strategy

Cell 2: Supports an diversification strategy

Major environmental threats

SWOT Analysis I

Strengths

Opportunities

Weaknesses

Threats

SWOT Analysis II STRENGTHS / WEAKNESSES

OPPORTUNITIES / THREATS

Firm, Organization

Environment, Market, Industry

• Market share • Key account share • Growth rate • Supply diversity • Influence • On market • Purchasing / selling deadline • New products cycles • Negotiation power - firm suppliers - customers

MARKET

• Market size • Key account size • Annual growth rate • Market diversity • Price sensitivity • Seasonality • Cycles • Negotiation power - suppliers - consumers

COMPETITION • Firm competitivity - Product, service - Profitability, H.R., … • Segments invested in • Firm’s integration level • High-tech vulnerability

• Competitor types • Concentration level • Intrants / extrants • Market share evolution • Vertical / horizontal integration • Technology substitution

SWOT Analysis III STRENGTHS / WEAKNESSES

OPPORTUNITIES / THREATS

Firm, Organization

Environment, Market, Industry

• Firm margins • Economies of scale • Barriers • Production capacity level

• Adaptability to change • Expertise / Know-How • Patent ownership • Production technology

• Reactivity / Flexibility level • Adaptability • Agressiveness • Working relationships

FINANCE / BUSINESS

TECHNOLOGY

SOCIO - POLITICAL

• Global benefits • Economies of scale • Barriers • Production capacity level

• Maturity / volatility • Complexity • Differentiation • Patents and copyrights • Production technology

• Attitudes / Social trends • Laws and regulations • Pressure groups • Trade union activities

The Generic Value Chain I Support activities

Firm infrastructure Human resource management Technology development Procurement Inbound logistics

Operations

Outbound logistics

Primary activities

Marketing and sales

Service

The Generic Value Chain II FIRM INFRASTRUCTURE HUMAN RESOURCES MANAGEMENT TECHNOLOGY DEVELOPMENT

PROCUREMENT

INBOUND LOGISTICS OPERATIONS

Marketing Management

Advertising

OUTBOUND LOGISTICS

Sales Force Administration

MARGIN

MARKETING & SALES

Sales Force Operations

Technical Literature

SERVICE

Promotion

The Generic Value Chain III Firm infrastructure Human resources management Technology development Procurement

Inbound logistics

Operations

Outbound logistics

Marketing and sales

Service

The Ansoff Matrix I

Current Products

New Products

Current Markets

Market penetration

Product development

New Markets

Market development

Diversification

The Ansoff Matrix II

PRODUCTS AND/OR SERVICES Existing

Existing

New

Market penetration

New product development

Market development

Diversification

MARKETS

New

The Customer Growth Matrix PRODUCTS AND/OR SERVICES

Existing

New

Customer loyalty

Customer extension

Customer acquisition

Customer diversification

CUSTOMERS

New

Product-Market Diversification

Product Diversification

Broad

Moderate

Narrow Narrow

Moderate Market Diversification

Broad

BCG’s Growth-Share Matrix I

RELATIVE MARKET SHARE High

High

Star

Low

Cash Cow

Low

Question Mark

MARKET GROWTH RATE

Dog

BCGâ&#x20AC;&#x2122;s Growth-Share Matrix II RELATIVE MARKET SHARE High Star

Low Question Mark

High E B MARKET GROWTH RATE

Divest

F Low

C G Cash Cows Targeted future position in the corporate portfolio

Dog Present position in the corporate portfolio

Divest

BCGâ&#x20AC;&#x2122;s Growth-Share Matrix III RELATIVE MARKET SHARE 10x

Low MARKET GROWTH RATE

High

1.0x

Low

Star businesses

Question marks

Cash generating businesses

Dog businesses

10%

High

0.1x

BCGâ&#x20AC;&#x2DC;s Growth-Share Matrix IV

Stars

22%

Question Marks

20%

1 3

16%

14% 12%

10%

Dogs

Cash Cows

8% 6%

4% 2%

10 x

0.1 x

Market Growth Rate

18%

The New BCG Matrix

Many

Fragmented

Specialization

Stalemate

Volume

Small

Large

NUMBER OF APPROACHES TO ACHIEVE ADVANTAGE Few

SIZE OF ADVANTAGES

Underlying Relationship Between ROI and Market Share in the New BCG Matrix SIZE OF THE ADVANTAGE Small

Large

Stalemate

Volume ROI

ROI

Few

Market share

NUMBER OF WAYS TO ACHIEVE COMPETITVE ADVANTAGE

Specialization

Fragmented ROI

ROI

Many Market share

Market share

McKinsey‘s Seven ‚S‘s Framework

Structure

Systems

Strategy

Superordinate Goals

Skills

Style

Staff

Disruption and the New 7-S’s VISION PLANNING Vision for Disruption Identifying and creating opportunities for temporary advantage through understanding • Stakeholder Satisfaction • Strategic Soothsaying directed at identifying new ways to serve existing customers better or new customers that no one else serves now.

Capability for Disruption

Market Disruption

Sustaining for momentum by developing flexible capacities for • Speed • Surprise that can be applied across many actions to build a series of temporary advantages

RESOURCE PLANNING

Tactics for Disruption Seizing the initiative to gain advantage by • Shifting the Rules • Signaling • Simultaneous and Sequential Strategic Thrusts with actions that shape, mold, or influence the direction or nature of the competitors‘ responses.

PUNCH-COUNTERPUNCH PLANNING

Core Competencies I

Banner Brand

Business Units

Core Products (Platforms)

Core Competencies

Core Competencies II

Processes

Core Competencies Technologies

Capabilities

Core Competencies III Low

Company View

High

Competency 1 Competency 5

Market View

Competency 4

Competency 6

Low

Competency 2 Competency 3

The General Electric Business Screen COMPETITIVE POSITION Strong

Average

Low

INDUSTRY ATTRACITVENESS

Medium

High

Weak

Attractiveness/Competitive Position Strategies COMPETITIVE POSITION Strong

High

INDUSTRY ATTRACTIVENESS

• Evaluate potential for • Grow leadership via • Seek dominance Segmentation • Maximize • Identify investment weaknesses • Build strengths

• Identify growth segments Medium • Invest strongly • Maintain position elsewhere

Low

Average

• Maintain overall position • Seek cash flow • Invest at maintenance levels

Weak • Specialize • Seek niches • Consider acquisitions

• Identify growth segments • Specialize • Invest selectively

• Specialize • Seek niches • Consider exit

• Prune lines • Minimize investment • Position to divest

• Trust leader‘s statesmanship • Sic on competitor‘s cash generators • Time exit and divest

Company Position/Industry Attractiveness Screen

High

HOLD

BUILD

HARVEST

HOLD

BUILD

Medium

HARVEST

HOLD

Business unit strengths

Medium

High

Low

Industry attractiveness

A Representative Nine-Cell Industry Attractiveness-Competitive Strength Matrix COMPETITIVE STRENGTHS/BUSINESS POSITION Strong

High

LONG-TERM INDUSTRY ATTRACTIVENESS

Average

Business F

Weak

Business A

Medium Business C

Business B

High priority for investment Low Business E

Business D

Medium priority for investment Low priority for investment

GE / McKinsey Multifactor Portfolio Matrix

BUSINESS STRENGTH

INDUSTRY ATTRACTIVENESS

Invest

Manage Selectively for Earnings

Invest

Manage Selectively for Earnings

Harvest or Divest

Manage Selectively for Earnings

Harvest or Divest

Portfolio Positions and Defensive Strategic Market Plans Very Attractive

Market Attractiveness

Protect

Protect or Harvest

Harvest or Divest

Protect or Focus

Harvest or Divest

Protect

Protect or Focus

Protect or Harvest

Very Unattractive Very Weak Competitive Advantage

Very Strong

Market Attractiveness â&#x20AC;&#x201C; Portfolio Classification and Strategies BUSINESS STRENGHT Strong

5.00

Medium

Weak

Invest / grow Joints High

MARKET ATTRACTIVENESS

Selectivity / earnings Aerospace Fittings

Hydraulic Pumps

3.67

Harvest / divest

Clutches Fuel Pumps

Medium Flexible Diaphragms

2.33

Relief Valves

Low

1.00 5.00

3.67

2.33

(a) Classification

1.00

The Risk-Reward Diagrams

RISK

High

Low

High REWARD (NPV)

Low

Contrasting Characteristics of Upstream and Downstream Companies Supply stages in a manufaturing industry (supply chain) Raw materials

Primary manufacturer

Fabricator

Product producer

Consumer marketer

Retail Consumer

Supply flow UPSTREAM ORGANIZATIONS

Centre of gravity of a manufacturing industry

DOWNSTREAM ORGANIZATIONS

Contrasting characteristics of upstream and downstream companies Upstream

Downstream

Commodity Standardize Maximize end users Low-cost producers Sales push Line-driven organization Process innovation Capital budget Capital-intensive Technological know-how Supply and trading/manufacturing and engineering

Proprietary Customize Target end users High margins Marketing pull Line/staff Product innovation R & D/advertising budget People-intensive Marketing skills Product development/marketing

Porterâ&#x20AC;&#x2DC;s Five Forces I Potential Entrants

Threat new entrants

Bargaining power of suppliers

Industry competitors

Bargaining power of buyers

Suppliers Rivalry among existing firms

Threat of substitute products

Substitutes

Buyers

Porterâ&#x20AC;&#x2DC;s Five Forces II Firms in other industries offering Substitute Products

Suppliers of raw materials, parts, components or other resource inputs

RIVALRY AMONG COMPETING SELLERS

Potential New Entrants

Buyers

Forces Driving Industry Competition Potential Entrants

Threat of new entrants

Bargaining power of suppliers

Industry competitors

Suppliers Rivalry among existing firms Threat of substitute products or services Substitutes

Bargaining power of buyers

Buyers

Barriers and Profitability EXIT BARRIERS Low

High

Low

PROFITS=LOW RETURNS=STABLE

PROFITS=LOW RETURNS=RISKY

High

PROFITS=HIGH RETURNS=STABLE

PROFITS=HIGH RETURNS=RISKY

ENTRY BARRIERS

Four Routes to Strategic Advantage Business/Product Offered Old/Existing

New/Creative

KFS

Aggressive initiatives

Compete (wisely) Route 1

Avoid head-on competition

Route 3

Intensify funtional differentiation

Ask „why-why‘s“

Relative superiority

Strategic degrees of Freedom

Route 2

Route 4 Exploit competitor‘s weakness

Maximize user benefit

The Generic Strategies I

Differentiation

Cost Leadership

Focus

The Generic Strategies II

COMPETITIVE ADVANTAGE Lower Cost

Differentiation

Broad Target

Cost Leadership

Differentiation

Narrow Target

Cost Focus

Differentiation Focus

COMPETITIVE SCOPE

Five Modified Competitive Strategies TYPE OF COMPETITVE ADVANTAGE BEING PURSUED

A Broad Cross-Section of Buyers

Lower Cost

Differentiation

Overall Low-Cost Leadership Strategy

Broad Differentiation Strategy

Best-Cost Provider Strategy

MARKET TARGET

A Narrow Buyer-Segment (or Market Niche)

Focused Low-Cost Strategy

Focused Differentiation Strategy

Sweeney‘s Generic Strategies

Marketer

Innovator

Emphasizes • Quality • Dependability • Range

Emphasizes • Quality • Product/service • Performance • Speed • New product/service • Development

Caretaker

Innovator

Emphasizes • Price/ cost • Dependability • Quality

Emphasizes • Quality • Product/service • Performance • Flexibility • Speed

Traditional

Enhanced

Strategic change involves enhancing the operation‘s infrastructure

Basic

Customer service criteria

Enhanced

Strategic change involves enhancing The operation‘s structure

Geobusiness Model

CONTROL VARIABLES

MOTIVATION VARIABLES

CONDITIONING VARIABLES

Porter‘s Diamond

FIRM STRATEGY, STRUCTURE AND RIVALRY

FACTOR CONDITIONS

DEMAND CONDITIONS

RELATED AND SUPPORTING INDUSTRIES

Resource Allocation at Corporate Level

PERCEIVED NEED FOR CHANGE

Low

„Formula“

High

Imposed priorities

EXTENT OF CENTRAL DIRECTION High

Free bargaining

Open competition

PIMS Competitive Strategy Paradigm Market structure • Market differentiation

• Market growth rate • Entry conditions • Unionization

Strategy and tactics • Pricing • R & D spending • New product introduction

• Capital intensity

• Change in relative quality and variety of products/services

• Purchase amount

• Marketing expenses

Competitive position

• Distribution channels

• Relative perceived quality • Relative market share • Relative capital intensity

• Relative vertical integration • Workforce productivity

• Relative cost

Performance • Profitability (ROS, ROI, etc.)

• Growth • Cash flow • Value enhancement • Stock (share) price

International Strategy Options

High

PRODUCT DIVERSITY

Joint venture

Foreign branch

Foreign subsidiary

Licensing/

Joint venture

Foreign branch

Export

Licensing/

Joint venture

Low

High MARKET COMPLEXITY

The Wheel of Competitive Strategy

Product Line

Finance and Control

R&D

Target Market

Marketing GOALS Definition of how the business is going to compete

Objectives for profitability, growth, market share, social responsiveness etc.

Sales

Distribution

Purchasing

Labor

Manufacturing

Generic Competitive Strategies

Return on Investment

Market Share

The Strategic Triangle I Multiple market segments Target segments

Customers

Corporation

Cost

Competitors

The Strategic Triangle II

Customers Needs seeking benefits at acceptable prices

Assets and utilization

Cost differentials

Company

Assets and utilization Competitor

Trilogy Strategy - Culture - Structure

Strategy

Structure

Culture

Optimum Degree of Formal Organization

Organizational effectiveness

Degree of formal organization

The Flow of Formal Authority

Functional, Divisional, Multidivisional Structures CEO

CEO

Controlling

Logistics

Manufacturing

Sales

Finance Cement

CEO

R&D

Concrete

Chemicals

Europe

North America

CEO

Europe

North America

Asia

Motor

Marine

Fire

Cement

Concrete

Chemicals

Asia

A Matrix Design FUNCTIONAL DEPARTMENTALIZATION Marketing Department Manager

Research and Development Department Manager

Purchasing Department

Production Department

Manager

PROJECT DEPARTMENTALIZATION Alpha Project

Project Leader

Beta Project

Project Leader

Gamma Project

Project Leader

Models of Virtuality

The Virtual Face

Star-alliance Model

Co-alliance Model

Value-alliance Model

Leavittâ&#x20AC;&#x2DC;s Diamond: The Interaction of Social Forces in an Organization

Task

Structure

People

Technology

Action-centred Leadership

TASK NEEDS

INDIVIDUAL NEEDS

GROUP NEEDS

Belbinâ&#x20AC;&#x2DC;s Team Roles

Shaper

Company Worker

Finisher

Chairman

Resource-Investigator

Group Development

Group effectiveness

Stage V Adjourning Stage IV Performing

Stage III Norming

Stage II Storming

Stage I Forming

Theory X and Theory Y Theory X

Vicious circle of theory X following

confirms

no responsability, no Initiative

strong rules and control

leads to

passive work attitude

Theory Y following

strenghten

no responsability, no Initiative

strong rules and control

leads to

Strenghten effect of Theory Y

allow

passive work attitude

Maslowâ&#x20AC;&#x2DC;s Hierarchy of Human Needs I

Self-Actualization Needs (self-development and realization)

Esteem Needs (self-esteem, recognition, status)

Social Needs (sense of belonging, love)

Safety Needs (security, protection)

Physiological Needs (hunger, thirst)

Maslowâ&#x20AC;&#x2DC;s Hierarchy of Human Needs II

GENERAL EXAMPLES Achievement

ORGANIZATIONAL EXAMPLES SelfActualization Needs

Challenging Job

Status

Esteem Needs

Friendship

Belongingness Needs

Friends in Work Group

Stability

Security Needs

Pension Plan

Shelter

Physiological Needs

Base Salary

Job Title

Herzberg‘s Motivator-Hygiene Theory

HYGIENE FACTORS

• SALARY • ADMINISTRATION • SUPEVISION • COMPANY POLICY • STATUS • WORKING CONDITIONS

MOTIVATORS

• ACHIEVEMENT • RECOGNITION • RESPONSIBILITY • ADVANCEMENT • NATURE OF WORK

Parallels Among Need Theories of Motivation Herzberg‘s Two-Factor Theory

Motivation Factors

Hygiene Factors

Maslow‘s Hierarchy of Needs

Achievement Work Itself Responsibility Advancement and Growth

Self-Actualization Needs

Recognition

Self-Esteem Esteem Needs Respect of Others

Supervision Interpersonal Relations

Belongingness Needs

Security Company Policies

Interpersonal Security Security Needs Physical Security

Pay Working Conditions

Physiological Needs

Alderfer‘s ERG Theory

Other Key Needs Need for Achievement

Growth Needs

Relatedness Needs

Existence Needs

Need for Power

Need for Affiliation

9 8

Country Club Management (1,9)

Team management (9,9)

Production is incidental to lack of conflict and „good fellowship“

Production is from integration of task and human requirements

Concern for people

Managerial Grid

Dampened Pendulum (5,5)

(Middle of the road.) Push for production but don‘t go „all out“. Give some but not all all: „be fair but firm“ Impoverished Management (1,1)

Task Management (9,1)

Effective production is unobtainable becaus people are lazy, apathetic and indifferent. Sound and mature relationships are difficult to achieve because, (human nature being what it is) conflict is inevitable

Men are a commodity just as machines. A manager‘s responsibility is to plan, direct and control the work of those subordinate to him

Concern for production

Situational Leadership (Supportive Behaviour) RELATIONSHIP BEHAVIOUR

LEADER BEHAVIOUR

(LOW)

HIGH R4 Able and Willing or Confident

Share ideas and facilitate in decisionmaking

Explain decisions and provide opportunity for clarification

Provide specific Turn over instructions responsibility for and closely decisions and supervise S4 implementation performance TASK BEHAVIOUR (Guidance)

FOLLOWER READINESS MODERATE R3 R2 Able but Unwilling Unable but Willing or Insecure or Confident

FOLLOWER DIRECTED

(HIGH)

LOW R1 Unable and Unwilling or Insecure

LEADER DIRECTED

Cultural Web

Stories Rituals and routines

Symbols

THE PARADIGM Control systems

Power structures Organizational structures

Dynamics of Paradigm Change The paradigm

Development of strategy

Implementation

Corporate Performance

if unsatisfactory Step 1 Tighter controls

Step 2 Reconstruct or develop new strategy

Step 3 Abandon paradigm and adopt new one

Four Organizational Cultures Power Culture

Task Culture

Role Culture

Person Culture

Integrated Model of Strategic Management Vision, values, and expectations

Mission

Strategy formulation

Goals, objectives

Situation analysis

Policies and procedures

• Alternatives • Evaluation and choice

• Enviromental opportunities/ threats • Organizational resources and competences Strategy implementation and planning

Strategic control Why?

What?

How?

Guidelines

M-O-S-T

Mission WHAT

an organization is seeking to do

HOW

an organization will achieve it

Objectives

Strategy

Tactics

Network Analysis, PERT, CPA 5

4 6

A 4 5

12 6

12 0

5 4 3

H 3

F 4

9 5

5 9

KEY: Activity Critical path Event Earliest event time Event number Latest event time

The Five Phases of Growth

collaboration

Large

coordination "?" delegation red tape

SIZE OF ORGANIZATION

direction

control

creativity autonomy Small

evolution: stages of growth revolution: stages of crisis

leadership Young

Mature AGE OF ORGANIZATION

The Chasm

The Mainstream Market

The Early Market The Chasm

Inventory Profile Steady and predictable demand (D)

Order quantity Q

Slope = demand rate

Inventory level

Average inventory = Q / 2

Time

Q/D Instantaneous deliveries at rate of D / Q per period

Economic Order Quantity

Costs

Total costs

Holding costs

Economic order quantity (EOQ)

Order quantity

Order costs

Cumulative % of total value

Pareto Curve for ABC-Products

Class A items

Class B items % of total number of items

Class C items

CIM-Concept CIM PPS

CAD/CAM CAD

Production Programm Planning

Quantity Planning

CAP

Time and Capacity Planning

Place Order

CAM

Control Order

The Business Process Re-engineering Approach

Activity 1

Activity 2

Activity 3

Activity 4

Micro operations

Customer needs

Customer needs fulfilled

Function 4

Customer needs fulfilled

Function 3

Business processes

Function 2

Customer needs

Function 1

Business processes

Micro operations

Total Quality Management

• • • • •

Whole operation involved Quality srategy Teamwork Staff empowerment Involves customers and suppliers

• • • •

Quality systems Quality costing Problem solving Quality planning

Inspection

Quality control

• Statistical methods • Process performance • Quality standards • Error detection • Rectification

Quality assurance Total quality management

Supply Chain Management Second-tier suppliers

First-tier suppliers

First-tier customers

Second-tier customers

The Operation

Supply side

Demand side

Purchasing and supply management

Physical distribution management Logistics

Materials management Supply chain management

Internal Rate of Return (IRR)

Main methods of capital expenditure appraisal

Return on Investment ROI

Pay Back

Net Present Value (NPV)

Discounted Cash Flow (DCF)

Internal Rate of Return (IRR)

Net Present Value (NPV)

Main methods of capital expenditure appraisal

Return on Investment (ROI)

Pay Back

Discounted Cash Flow (DCF)

Internal Rate of Return (IRR)

Net Present Value (NPV)

Variance Analysis Profit Variance

Total Cost Variance

Materials Price Variance

Labour Variance

Variable Overhead Variance

Materials Usage Variance

Total Sales Variance

Fixed Overhead Variance

Wage Rate Variance

Sales Volume Variance

Sales Price Variance

Labour Efficiency Variance

The Link Between the Balance Sheets and the Income Statement Balance Sheet December 31, 2001

Assets $170

Income Statement Year 2002

Liabilities $100

Balance Sheet December 31, 2002

Assets $190

Ownerâ&#x20AC;&#x2DC;s equity $70 Revenues $480

Expenses $469.8

Liabilities $113 Ownerâ&#x20AC;&#x2DC;s equity $77

Net Profit $10.2 Retained earnings $7 Dividends $3.2

Working Capital

Simple cycle of operations

Cash

Raw materials inventory

Receivables

Finished goods inventory

Financial Strategy Framework Due dilligence process

Investor Investment strategy

Alternative Investments

Time to close deal

Risk/Reward Space

Financial Strategy

Opportunity

Debt

Entrepreneurial concerns

Time to out of cash Future alternatives

Sources and Deal Structure

Equity Other

Burn Rate Operating Requirements

Financial Requirements

Business Strategy

Working Capital Market Strategy Asset Requirement

Technological Strategy

Investor Perceived Risk-Return Space

Angels High

FFF VCs Entrepreneur

PERCEIVED RETURN

Moderate

Realistic Investors

Banks Low

Low

Moderate PERCEIVED RISK

High

Du Pont Scheme Return on equity ROE =

Earnings after tax Owner‘s equity

Return on invested capital ROIC =

Earnings before interest and tax Invested capital

Financial leverage multiplier

Operating profit margin

Capital turnover

Financial structure ratio

Earnings before interest and tax Sales

Sales Invested capital

Invested capital Owner‘s equity

Invested capital

Owner‘s equity

Sales

Operating costs

Cash Working Capital requirement Fixed assets

Financial cost ratio

Tax effects

Tax effect ratio

Earnings before tax Earnings after tax Earnings before interest and tax Earnings before tax

Cost of debt

Tax rate

The Drivers of Value Creation EBIT Operating margin = Sales Sales Capital turnover = Invested capital

EBIT Invested capital (pretax ROIC) Expected after tax ROIC

Tax effect = (1 â&#x20AC;&#x201C; Taxe rate)

Aftertax cost of debt

Estimated cost of equity

Return spread (ROIC â&#x20AC;&#x201C; WACC)

Percent of debt financing

Market Value Added (MVA) Weighted average cost of capital WACC

Percent of equity financing

If the present value of the future stream of expected return spreads is negative, MVA is negative and the higher the growth, the more value destroyed.

Economic, political, and social environments

Market structure

Competitive advantages and core competencies

If the present value of the future stream of expected return spreads is positive, MVA is positive and the higher the growth, the more value created.

Sustainability of growth

Business Design Process Economics

Changing Customer Priorities

What are the key assumptions About customers and economics?

Whatâ&#x20AC;&#x2DC;s important to customers?

How can profit be made?

What dimensions matter the most?

What are my choices now? In the future?

Which ones are best?

Are the best choices internally consistens integratable?

Whatâ&#x20AC;&#x2DC;s my best business design?

How long will this design be valid?

How can I prepare for ongoing redesign?

Technology

The Company Center of Gravity

The Entrepreneurial Phase

The Growth Phase

The Success Phase The Center of Gravity

The Center of Gravity The center of gravity

The Company

The Customers

The Company

The Customers

The Company

The Customers

The Traditional Value Chain The Traditional Value Chain Start with Assets, Core Competencies

Assets/ Core Competencies

Inputs, Raw Material

Product/ Service Offering

Channels

The Customer

The Modern Value Chain Start with the Customer

The Customer

Channels

Offering

Inputs, Raw Material

Assets/ Core Competencies

The Modern Value Chain Truly Understanding the Customer

Purchase Criteria Customer Anger Preferences Power Decision-Making Process

Customer Priorities

Channels

Purchase Occasion Buyer Behavior Functional Needs Systems Economics

Offering

Inputs, Raw Material

Assets/ Core Competencies

Profit

Customer Solutions Profit

Product Pyramid Profit

Price

Volume

Multicomponent Profit

Base Business

Other Components

Switchboard Profit

Buyers

Sellers

$/Unit

Time Profit

Cost

Price

Time

$/Project

Blockbuster Profit

Revenue

Cost Project Type

Profit Multiplier Model Other Forms

Key Asset

Entrepreneurial Profit

Base Business Spin-Outs

Return on Sales

Specialization Profit

Generalist

Specialist

Profit Margin

Installed Base Profit

Hardware/Base Product

Consumables/ Follow-on Product

Profit Margin

De Facto Standard Profit

Market Share

Price/Unit

Brand Profit

Market Price

Brand Price

Specialty Product Profit 100 %

Revenue

Five Years Ago

Today

Profitability by Region

Local Leadership Profit

Local Market Share

$/Unit

Transaction Scale Profit

Revenue

Cost

Size of Transaction

Value Chain Position Profit

Cycle Profit

$/Unit

Price

Cost

Utilization

After-Sale Profit

Base Product

Follow-on Products/Services

New Product Profit

Time

Return on Sales

Relative Market Share Profit

Relative Market Share

Cost/Unit

Experience Curve Profit

Cumulative Experience

$/Unit

Low-Cost Business Design Profit

Conventional Business Design

Low Cost Business Design

GE's Business Design: „Sell the Solution, Not Just the Box“ Sell the Box, or ...

Product

... Sell the Whole Solution

Product

The Profit Zone

Options

Accessories

Financing

Services

The SMH Product Pyramid The Profit Zone

Blancpain

Omega, Longines, Rado

Tissot, Certina, Mido, Pierre Balmain, Hamilton, Calvin Klein

Swatch, Flik Flak Endura Lanco

Coca-Cola's Business Design: Manage the Value Chain 1980

Distribution Consumer

Grocery

Logistics

Bottling

Syrup Coca-Cola Brand

Fountain

Vending 1996

Distribution Consumer

Grocery

Logistics

Fountain

Vending The Profit Zone

Coca-Colaâ&#x20AC;&#x2DC;s participation, influence no participation

Bottling

Syrup Coca-Cola Mega Brand Coca-Cola, diet CocaCola, Caff. Free, diet Caff. Free, Cherry, Diet Cherry

The Charles Schwab "Switchboard" Investors

Mutual Fund Companies

Investors

Mutual Fund Companies

The Profit Zone Schwab One Source

Intel's Business Design: „Two Steps Ahead“

The Profit Zone

$/Unit

Intel

AMD

Cost Price

Quarters Post-Launch

Q10

Disneyâ&#x20AC;&#x2DC;s Business Design Reinvention The Profit Zone

The Value Capture

Cruises

Publishing

Hotels

Television

Retail

Merchandise

Theme Parks

Music

Animated and Live-Action Films

Videocassette

The Thermo-Electron "Spin-Outâ&#x20AC;&#x153; Business Design The Profit Zone

Thermo Instrument Systems

Thermo Spectra

Thermo Optek

Thermo Voltek Thermo-Electron

Thermedics Thermo Sentron

Thermolase Thermo Trex

Trex Medical

Microsoft's Business Design: Create-the-Standard OEMs

The Profit Zone Microsoft Applications

Windows

Applications Developers

Customers

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