Business Strategy to Business Plan Part 1 Course Introduction & Fundamental Strategy and Analysis | John Colley | Skillshare

Playback Speed

  • 0.5x
  • 1x (Normal)
  • 1.25x
  • 1.5x
  • 2x

Business Strategy to Business Plan Part 1 Course Introduction & Fundamental Strategy and Analysis

teacher avatar John Colley, Digital Entrepreneurship

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Watch this class and thousands more

Get unlimited access to every class
Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

32 Lessons (2h 45m)
    • 1. Business Strategy to Business Plan SK Intro

    • 2. How To Get The Most From This Course

    • 3. Using the Course Map Matrix

    • 4. Guide to the Course Assignments

    • 5. Introduction Business Fundamentals Business Strategy

    • 6. Business Strategy to Business Plan

    • 7. What Do We Mean By Business Strategy?

    • 8. What is a Business Plan?

    • 9. What Do We Mean By Corporate Strategy?

    • 10. Should You Be Creating Shareholder Value?

    • 11. Introduction to Strategic Management

    • 12. BUSINESS FUNDAMENTALS The Value of Strategic Analysis

    • 13. Strategic Analysis - The First Step

    • 14. What is Strategic Analysis?

    • 15. Frameworks for Strategic Analysis

    • 16. Strategic Analysis Case Study Apple

    • 17. Strategic Analysis Assignment - Apple SWOT Analysis

    • 18. 4 BUSINESS FUNDAMENTALS Frameworks and Theories Business Strategists Must Know

    • 19. Why are these Business Models important?

    • 20. The Tale of the Hedgehog and the Fox

    • 21. Why Are Management Theories Useful?

    • 22. SWOT Analysis

    • 23. Introduction to Michael Porter’s Competitive Five Forces

    • 24. Lafley and Martin 5 Step Strategy Model

    • 25. 5C Analysis

    • 26. What is PEST or Broad Factors Analysis?

    • 27. PESTEL Analysis

    • 28. Ansoff Matrix

    • 29. Value Chain

    • 30. Business Model Synthesis

    • 31. Black Swan Events Coronavirus

    • 32. Part 1 Wrap Up - Coming Up Next in Part 2

  • --
  • Beginner level
  • Intermediate level
  • Advanced level
  • All levels
  • Beg/Int level
  • Int/Adv level

Community Generated

The level is determined by a majority opinion of students who have reviewed this class. The teacher's recommendation is shown until at least 5 student responses are collected.





About This Class


Welcome to my Business Strategy to Business Plan Course - Part 1

Discover MBA Level Business Strategy and Create your comprehensive Business Plan simultaneously. Everything you need is here including a highly detailed Business Plan template.  

BUSINESS FUNDAMENTALS: Connecting Business Strategy to the Business Plan

Discover the connections between Business Strategy, Corporate Strategy and the Business Plan.

BUSINESS FUNDAMENTALS: The Value of Strategic Analysis

Understand the main frameworks for Strategic Analysis and be able to complete a SWOT Analysis

BUSINESS FUNDAMENTALS: Frameworks and Theories Business Strategists Must Know

Discover some of the Key Strategic Business Models taught at Business School, providing you with a toolbox frameworks to apply to your Business Strategy formulation

About this Course

Discover Business Strategy to MBA standard - from an MBA (with Distinction from Cass Business School, London) - and simultaneously create a comprehensive Business Plan guided by an award winning 30 year London Investment Banker.

I guarantee that this is a unique course: the only course that teaches you Business Strategy and shows you how to create your Business Plan - at the same time!  The 21 Assignments in this course draw on John's unique experience, including bespoke strategic exercises of his own which you will not see anywhere else.  Step by Step following the incredibly detailed Business Plan template, John will guide you to apply the Business Strategy lessons to create your Business Plan. These will help any students of all levels and in any industry.  

This course has over 160 lectures, over 14 and a half hours of detailed instructional video and nearly 180 downloadable materials (available from a dropbox link you will find at the start of the course).  Despite its complexity, John has created a detailed course matrix for you to use to navigate through the course and understand the synthesis of Business Strategy 2 Business Plan.  There are over 20 Assignments to make the course fun and highly interactive.  The 2 Quizzes will challenge you too!  Every section has an introductory video explaining the learning objectives and lessons in that section.


Business Strategy 2 Business Plan Part 1 - Fundamental Strategy and Analysis -

Business Strategy 2 Business Plan Part 2 - Leadership, Products and Services-

2nd June - Business Strategy 2 Business Plan Part 3 - Competition, Industry and Markets

9th June - Business Strategy 2 Business Plan Part 4 - Operations and Customer Value

16th June - Business Strategy 2 Business Plan Part 5 - Sales and Marketing

Business Strategy 2 Business Plan Part 5a - Digital Business Transformation -

23 June - Business Strategy 2 Business Plan Part 6 - Financial Statements

30th June - Business Strategy 2 Business Plan Part 7 - Financial Analysis

7th July Business Strategy 2 Business Plan Part 8 - Goal Setting and Performance

14th July Business Strategy 2 Business Plan Part 9 - Growth Strategies

21 July Business Strategy 2 Business Plan Part 10 - Valuation, Exits and Returns

28 July Business Strategy 2 Business Plan Part 11 - Business Plan Synthesis

As the course is published, I will update the links to each course

Enjoy the Course!  If you have any questions or issues, just reach out to me here

Best regards


Meet Your Teacher

Teacher Profile Image

John Colley

Digital Entrepreneurship


Exceed Your Own Potential! Join My Student Community Today!


Do you have Skillshare Premium?

Skillshare Premium is required to watch most of my courses because it gives me the chance to earn money based on every minute you spend watching. You learn and I get paid we both win and it encourages me to produce more content for you. The Skillshare Premium subscription that gives me unlimited access to thousands of Skillshare courses all for free for the first month and then $96 a year after that which is just $8 per month! You can watch anything you like and as much as you want how awesome is that? Want to get 2 months FREE then sign up at because Skillshare will give... See full profile

Class Ratings

Expectations Met?
  • Exceeded!
  • Yes
  • Somewhat
  • Not really
Reviews Archive

In October 2018, we updated our review system to improve the way we collect feedback. Below are the reviews written before that update.

Why Join Skillshare?

Take award-winning Skillshare Original Classes

Each class has short lessons, hands-on projects

Your membership supports Skillshare teachers

Learn From Anywhere

Take classes on the go with the Skillshare app. Stream or download to watch on the plane, the subway, or wherever you learn best.


1. Business Strategy to Business Plan SK Intro: Hi. Welcome to business strategy to business plan. My name is John Colley. I'm a 30 year senior investment banker and entrepreneur on I'm really excited to welcome you to this course, which is all about business strategy on at the same time, it's about how to create a business plan. This class is gonna be absolutely perfect for you if you want a better understand business strategy and at the same time, learn how you can take that knowledge on write a business plan with it. At the end of this course, you will have written your comprehensive business plan simply by following the course projects step by step. This course is focused on teaching you business strategy to MBA level. I know that because I've got an MBA, and at the same time I want you to create a really comprehensive business plan which is going to help your business. And it's getting those two intermeshed and into connected. That is the really important point about this course. Now I've split this course into 11 separate parts on every part. Off the course takes you a step closer to that amazing business plan. Now don't be put off by this. But here are the 11 parts. This is what we're going to cover in part one fundamental strategy and analysis. That's what this particular course is all about. Then we're going to go look a leadership products and services, the competition, industry of markets, operations, customer value, sales and marketing, financial statements, financial analysis, gold sitting in performance growth stretches, valuation exits and returns. And then finally, the final part, which is all about business plan synthesis. But each part has got AIDS on assignment project that is gonna help you to create that business plan as you go through it. So in this part one we're going to take a look at at three main topics. First of all, we're gonna look at how you connect business strategy to the business plan, some basically business fundamental lectures, which you're going to help you to discover the connection string, business strategy, corporate strategy and finally, the business plan. Then we're going to look at the value of strategic analysis and understand the main frameworks for strategic analysis on then be able to complete a SWAT analysis on. Then finally, we're going to look at some of the frameworks and theories that business strategy issues every day some of the key business models just to make it fun. I've got a little fun quiz at the end of that. So to start with, I want to know that this course I'm going to share with you a high level introduction to the whole off the course. All 11 parts on I'm going to share with you my course map matrix so you'll be able to look into this in detail and see exactly what's coming up in the later parts In the later modules, you can download these materials right now from the project section off the course. So this course is gonna open your eyes to a completely new way to look at your business using models and frameworks. I'm going to show you how to apply these ideas and strategies to your business in a practical way. Now, I didn't set out to create a long class. I set out to solve a problem, how to teach business strategy and how to tie it into a businessman because, frankly, nobody has being doing that. I haven't seen a single course that does that on this course is the result of all that, and I will be publishing it in weekly installments. So I'm really excited to share this with you. And I know you're going to absolutely love it. So in role now. And I'll see you in the course business strategy to business plan. It says it all, and I think you're gonna absolutely love it. 2. How To Get The Most From This Course : want to spend a couple of minutes with you now just explaining how you can get the most from this course. And really, what I want to show you is how the courses structured and organized and why I've put it together. The way that I have the principal course objective is to help you devise a business strategy and then be able to deliver a business plan from it. So its business strategy to business plan. The three main steps to achieve this are, first of all, working out what the business strategy is and what a business strategy is. So your understanding what we're talking about in terms off the hypothetical construct off the whole idea off the course. Then we need to put it together in some form of corporate strategy, which we then turn into a business plan. So we're basically going from business strategy across to the business plan. No, if we look at this in another way, we start with the business strategy, and we need to understand exactly what a business strategy is on to put the framework around how we're going to devise that strategy. We then need to understand how we're going to do it. So we need to work out on work inside our business to understand the business. Andi work out the right strategy for the business, so we have to work out a corporate strategy, which is a sub strategy to business dress. She and from that. Once we've got all that put together, we can put together our business plan. But I want you to think about it in a slightly different way because what we're doing in the first part of the course is we're setting up the thesis. I'm explaining to you exactly what a business strategy is on, how you're going to put together. So I'm giving you the building blocks for that, and that's what I'm calling the thesis. Then we're doing the analysis. We're doing ALS. The heavy lifting the nuts and bolts were working through the business and understanding the business and applying Ah whole Siri's off different criteria and frameworks and theories to make sure that we've really got all aspects off our corporate strategy pinned down and I'm calling that the analysis phase on. Then finally we put it all together on we bring it together and we come or end up with a business plan. I'm calling that the sense of synthesis phase, if only I can say it. So let me explain, just to make sure we understand exactly what these three words mean. Thesis is a statement or theory that is put forward as a premise to be maintained or proposed. So I'm basically setting you up to understand what a business strategy is and how you're gonna put it together. Analysis is the process off separating something into its constituent elements. So I'm breaking it down for you section by section and taking you through the whole of the corporate strategy framework so that you've got every single piece understood in detail standing on its own. Or there there are cross references. And then, finally, synthesis is the competent combination off these components or elements to form a connected whole. So we then bring back the's separate elements. From the analysis on, we combine them into forming a business plan. So what does the course look like? And I apologize that this is going to look a little bit crowded, but I'm gonna walk you through the main sections off the course I've explained We got three principal areas. The business strategy. Oblique thesis. We have the corporate strategy oblique analysis, and we have the business plan Oblique synthesis. So you got these three key sections on. This is how the course splits down. To start with, I'm gonna take you through understanding business strategy and the business plan exactly what we mean by these two principal frameworks on the underlying issues behind them. Then we're gonna talk a little bit about the value of strategic and as is this is the why you're doing it. And if you're speaking to your colleagues or your boss and you need to explain to him why this is important, this is where you're going to learn that on. Then I'm going to show you some of the essential frameworks of business theories that you will use as a tool box as you go forward in the course. So we're setting up the thesis for the rest off the course, there's that Those are the 1st 3 principal sections. Now comes the main body of the course, where we're really going into the detail, corporate strategy and the analysis phase on. We start off by hamburger. Look at an evaluation off leadership and management. We then go and have a careful look, and I give you frameworks and tools for analysing your products, services and your competitive advantage. Next we take a detailed an analytical look at the competition. Who are they? What are they doing? Because you need to understand what drop against. Then we take a sightly broader step back from the focus on the competition to the whole external analysis. So we're looking at industry markets on your competition within that, so you get a holistic view and you'll be ableto analyze holistically, the whole off your industry, your markets and your competition. Having done the external bit logically enough, we're now going to look at the internal bit, so we look at operations and customer management from there. I take you to looking at the customer value proposition on understanding exactly what that means, because that is at the absolute core, off your competitive advantage and your business strategy, and then look and spend some time analyzing the sales, a marketing strategy. Then I'm going to take you on a little journey through digital business, and when I've called digital business transformation, it's my framework for how to organize digital business. And you need to bring a digital business element into your strategy into your analysis to make sure you're getting the most out of it. It's too important to ignore. Then we're going to spend a couple of sections looking at finance. So we're looking at understanding financial statements, and I'm gonna follow that up with strategic financial analysis. So the first section helps you to understand the profit and loss account or income statement, the balance sheet on the cash flow. And then the second statement shows you have used ratio analysis toe. Analyze these three statements, having done all that we can then move into the synthesis phase in tow. How we're going to bring together our business plan on. The first part of that is about goal setting and performance. Then we're going to look at some growth strategies. I'm going to give you some options, four growth and, of course, having done all the analysis you need to understand thinking about, you know how you're going to execute your corporate strategy, and this is where we look at these strategies for growth. I then take you through evaluation funding and exits in most business plans. This is a key section because you prepared the business plan very often to raise capital or to go and print to present to external investors or external parties. So you need to be able to talk about valuation funding and exits. Then I'm going to go through a risk assessment, which is really going back into the other sections of the course and pulling out the key corporate strategy elements where you need to do a risk assessment on be able to present that risk assessment as part of your business plan on, then finally on bringing it all together into the business plan synthesis where, although along the way, I will have shown you step by step how all these elements tie into the business plan in the business plan synthesis, we pull it all together and you end up with a business plan that you can present. So at every stage, let me stress the of the corporate strategy announces. I will cross, refer and show you the business plan topics of irrelevant to that section. Every section has the headings on the business plan elements, so you can see exactly how they tie into that section. Andi, As you're working through the section, you'll know where to go when you need to study to put your business plan together. So I hope you find that a helpful and objective explanation of how this course works, how it's put together and how you can get the most from this course. 3. Using the Course Map Matrix: want to talk to you now about how you can use the course map matrix that I've created for you to navigate around this course and find what you need to. As you've seen in the previous lecture, the course is divided into three major areas. Three principal steps on the sections and lectures fit into these the three areas, as you recall, where the business strategy stroke thesis, the corporate strategy stroke analysis on the business plan stroke synthesis and you can see the different sections off the course here on this slide. But we're also working to create a business plan from this course on. That business plan has 14 sections, and they're shown in the column on the right. But in addition to that, I've got lecture topics covering the assignments and quizzes the tie ins to the business plan on the MBA concepts and ideas. Other three at the top there. So it's a question of trying to make sure I can map the two together because in order to make us course as valuable as possible for you, I want you to have this course map so that you can match the business strategy to the business plan topics and see how they interact with Inter. Relate to one another. Now I'm going to explain the assignment structure in the next lecture, so we'll just put the assignments aside for one moment. The Matrix on the next slide shows the high level the course business strategy sections on the left hand side on the business plan topics across the top, color coded you've just seen so we can see how these match upto one another so you can see the business plan topics at the top. You can see the course sections down the left hand side, and you can see how the different sections click and connect across to the strategy. And I hope this is relatively straightforward. Now, in the resources sections lecture, you're gonna find a spreadsheet. The strategy course Matrix map. This has three sheets. The first sheet is the business plan, a list of table of contents that you'll be familiar with that on your be behind the end of this course, you'll be very familiar with that. The next sheet is a detailed course map matrix from which I have created the third sheet, which you've just seen on this on this slide before this, which is the summary course, Matt Matrix. So what I want to do is to show you these now individually from a screenshot so you can see what to expect. So here we are in the spreadsheet, and you can see the first table has the table of contents for the business plan. Okay, so you've got all of these going down here on your become very familiar with this. You've got a proper business plan to work with, but these are just the topics from the business plan. Now, let's show you next what you've just seen in the lecture, which is this summary table on across the top. You've got the business plan topics and down the left hand side, you've got the sections of the course, and you're familiar with that? Because I've just shown it to you in the lecture on a slide. However, this is the exciting bid, and I go back to the top. This is the course plan on a lecture by lecture basis. On the left hand side, you can see the sections, the lecture titles on the brief descriptions of what's in each lecture on Then you can see how they tie into the business. Plan a lthough way across, and if I just scroll down slightly and you can see you've got the N B. A concept here, you've got the assignments and quizzes come up on the left hand side. We're going down, and you can see how each of these has a tie in to one or more parts of the course. I'm not going to explain these to you in detail. There's no point you'll be able to download this spreadsheet and take a look at it for yourself. But this is your map to the course. So if you want to study everything to do with the market, you just have to follow every lecture that is tied into the market. It's a simple is that, But hopefully this will give you a very straightforward way off, understanding how the strategic planning maps on matches to the business plan topics at the top, and you can see it goes on for quite a while because there's 100 the moment, and I'm close to finalizing the course as I'm recording this so there may be one or two extra ones in it, but at the moment we're 135 lectures plus the assignments, and they're 21 assignments. So as you can see, it's 160 odd rows. But hopefully this will act as a very useful mapping tool for you, and it will make understanding and moving around and using the whole course very much easier for you. So use this spreadsheet to navigate around the course and find the topics that you want to research. I stress the objective is to make quite a complex course as easy for you to navigate so that you can map business strategy to the topics of the business plan. Because the whole idea of this is for you to understand in detail. The business strategy is not just the how and the what. It's the wise, the background to the strategy and the planning, so that you can create a plan which has got really knowledge behind it. In the next lecture, I'm gonna explain to you the purpose of the 21 assignments in the course on I've left that separately so you can understand how I've used the assignments to enable you to step by step. Build your business plan, but we're gonna have a look at that in the next lecture. So that's how you use the course map matrix to navigate around the course and get the maximum value from it. 4. Guide to the Course Assignments: I want to take you now through the course assignments, so you understand exactly what they're all about. The assignments in this course are designed to make the course more fun. Andi also to help you with your learning experience. But there's 1/3 objective as well, because they're designed to enable you to build your business plan step by step, and I'm gonna show you in this lecture exactly how it all works. So, first of all, let me show you the layout of the course assignments as you're going to come across them in the course. This is following the structure off the business strategy course itself. So here the assignments. So briefly speaking, the case studies, which revolve around Apple, are in blue. There's a business model quiz to help you to reinforce the lessons off that particular section, where I take you through a series of different business models, which is just a bit of fun just to reinforce some of the structures. The three Purple assignments are basically strategic assignments, helping you with your own business strategy as part of the business strategy process and then the red assignments, BP, a business plan assignments are the assignments, which is designed to enable you to create your business plan step by step. So if we just take a little look, I'm gonna take out the business plan assignments. First of all, I just want to show you how this all works. So now you can see there are the two case study assignments. There's the business model quiz. And then there, there three business strategy assignments. So that should know now all make sense to you. So if we go back to where we were, let's take out those assignments just to leave us with the business plan assignments now always helps to do a bit of tightening up. So they were those of the business plan assignments, as you will come across them in the order in which they are in the course. The S six has seven s eight section six, section 7/7 in section eight, and the assignments are numbered, as they are in the course. 3456 89 11 because there are other assignments in the middle, so you can see how they're laid out in the course on that is there to show you exactly what you're gonna do. You gonna come across from what you can expect to find in the course, but let's rearrange them on. This is the business plan assignments in the business plan order, and you see what you're going to be able to do as you go through the course and you complete each assignment. Then the assignments will create your business plan. And that's the order in which you would need to rearrange them if you were going to do them in the business plan order. But you've also got a business plan template, which means basically, as long as you fill in the right sections of the template at the right time, you'll end up with sections in the right order anyway. So I wanted you to understand exactly how this all ties in the business plan assignments tie into the sections, which time to the business strategy, and you can see that you're going to be able to create your business plan step by step as you go through the course. So if you need to use this slide deck as a some sort of a memoir reference guide, then by all means download it and you'll be able to see exactly where you are as you go through the course. So that's the guide to the course assignments. I hope you find that helpful. I know there were a lot of fun to put together. I don't think I've actually ever made, of course, with so many assignments in it, but it's designed to make the creation of your business plan from your business strategy as easy as it possibly can be. 5. Introduction Business Fundamentals Business Strategy: business fundamentals Connecting business strategy to the Business plan section. Learning Objective. Discover the connections between business strategy. Corporate strategy on the business plan. The key objective of this course is to enable you to develop a detailed business strategy for business and then be able to convert that strategy into a business plan. The first problem is that a business strategy is an internal document on a business plan is for external consumption. The audience is different, the purposes are different. We will achieve our goal by making sure that we understand both the strategy and the plan right up front and then working through the course, maintaining the links between them. To start with in this section, we are sitting out to understand the main course objective what we mean by a business strategy. Onda Business plan. We also discussed corporate strategy, as this is an intermediate step between business strategy On the business plan, a full business plan template is available to download from the Resources section off the business plan lecture. We take the opportunity to challenge your perspective of shareholder value often, and we think mistakenly a key objective off business strategy. We conclude this section by explaining strategic management as this is a key framework for creating your business strategy. At the end of this section, you will have a clear idea of what we mean by business strategy and a business plan, and you will be beginning to understand how they eventually will be connected together. 6. Business Strategy to Business Plan: one to talk to you first about one of the most unique and critical aspects of this entire cause, which is the business strategy to business plan integration. The goal of this course. After some depth and consideration, I've spent about three or four days trying to work out. The best way to present this to you is actually very simple and, I think quite unique. I want to show you how to analyze business strategy. I want toe help you to understand business strategy. But at the same time, I want you to be out of these meat useful with it and had so often not the case with business strategy on what I wanted you to be able to do is to take your business strategy, analysis and immediately no how to transfer it into a business plan. And if you do that, you're gonna have so much more depth off data and information and knowledge and understanding about your business to enable you to create an absolutely amazing business plan. The problem is quite a simple one, but yet it's a complex one. It's a simple one because business strategy and business planning share a lot of the same topics, not of the same subject matter. The problem is, they're actually quite complex subjects on the information, and the approach is organized in a very different way. There are several different templates you can use for a business plan, but to make life really interesting, there are hundreds off different business strategy templates, approaches, methodologies, etcetera. On the tricky is actually getting some sort of organization around the business strategy on then being able to dovetail it with the business plan. This course will teach you business strategy with a wide range of tours, models and assignments to help you to get a grip off business strategy that is one of the prime goes off this course. I want you to have a really good grasp of business strategy, but in order do something useful with it. I'm gonna integrate my business plan, outline into this course and show you at every step of the way what information you're gathering from that section in order to bring it into the business plan. This means you'll end up with a business plan, but so much more because you're gonna have behind it all. The in depth strategic analysis you need to support your plan, and I think that's a vitally important aspect, particularly if you're presenting to a board or presenting to investors. You really need to have a grip of the information as a starting point. I've attached my business plan template, which is got detailed numbering on our right to the resources section off this lecture. And this means that you get the outline business plan to start off with, and I will then cross reference as I go through the course where that particular section of the course contributes to the business plan because of the numbering. I'll make it very clear to you that in this section we're actually going to be covering ground, which will be able to then answer this part of the business plan. Now, please note because this is fundamentally a business strategy course. There will be sections in the course that don't have this cross referencing. But that's where you will be taught business strategy, which is the background to the information you need to create the business plan. So I hope this is not too confusing. I'm gonna teach you business strategy, but I'm going to show you how to integrate that knowledge as you go through in order to put it straight into a business plan, which hopefully will make your business planning process much richer, much more in depth, much higher quality and much, much easier. So business strategy to business plan. That's the one of the primary objectives of this course on. I'm gonna work very hard to make it as easy as I can for you. 7. What Do We Mean By Business Strategy?: So let's continue our definition and framework setting by asking the question. What do we mean by business strategy on? I want to be very clear here again because we're using these terms and unless we get a very clear understanding off them from the outset, the terms can become confusion. They can seem to merge into one another. Andi, unless we have some very clear definitions right up front, I think it's there is a risk in the whole course that you'll lose the direction and the threat of what I'm trying to explain to you. So business strategy first and foremost, does not set goals. It creates the analysis on the frameworks which lead to gold setting on. Then afterwards, it is the implementation of the actions to achieve these goals once they've bean set by the senior management and the owners off the business. So I reiterate, business strategy is not in itself on objective or goal setting exercise. What it is is it's analysis and formulation and then it's implementation and from the analysis on the formulation come the goal setting. So we start off when we analyze the external and internal environment for the business and we then formulate a strategy around the capabilities of the business, and at that point, goals and objectives are set. Then, in terms of the implementation phase, the business is organized to implement the chosen strategy to achieve those goals and objective. And finally, financial plans are put in place so that you can measure and evaluate the results on, therefore, decide how successful strategy is on what you have to change. Do you have to have some measurement mechanism so trying to be very clear and very straightforward right up front? That is what I am mean by business strategy. That's where I want you to understand by a business strategy before we get into a lot off the meat and drink off this course. 8. What is a Business Plan?: It does seem sensible at this point to ask a very basic question. What is a business plan? If you're new two. Business strategy and business plans, then I do think it's helpful for me just to take a short pause and explain to you exactly what I mean by a business plan on. I'll do something similar for business strategy in the next section. A business plan is basically the operational and financial plan written down over business , which helps to think through and explain how the business objectives are going to be achieved. It's a business roadmap if you like, It explains to the management. It could be used to communicate to employees, the other shareholders, investors, stakeholders. And if you're trying to raise capital, you can use it as a part of the documentation your need to protect to present to investors . Teoh help persuade them to invest in your business, so it's actually quite a complex and important document. I've written quite a lot of them and they can run to over well over 100 pages easily, and that's before you get into all the appendices, which can be as long as you like basically I mean, you put as much information in the appendices you want. What I want to do then is quickly run through the main contents here. Please note this is following the format off the download off the business plan outlined from the previous lecture. So it's probably worth you having that in front of you. The title page is very straightforward, which basically explains who the businesses and puts contact information and stuff on the front. You then have the executive summary. Now this is basically a two page, no more than a two page part of the plan, which basically pulls together everything that follows. So it has the major that major headings and titles, and it's it's there to help anybody who's reading it to get a quick grasp off the main fundamentals off. What's in the document. You then explain a bit about the history on the background of the business of your situating the business in its its historical background and who found it and what it's trying to do. And then I like to go straight into the products and services of the business and where you're delivering technology as well, or you've got intellectual property, then that's where you would explain all that. So it's, Here's the history of business, and then this is what the business sells to its customers. In order to put some context into that, you then deliver a section on the market and the industry overview. So you're explaining the macro environment in which the businesses trading. And of course, you want to be able to communicate who your customers are on. You need to demonstrate here a very clear understanding that you know exactly who your customers are and how you reach them. The how you reach the bit then obviously comes in the sales and marketing put peace, which follows immediately after customers. You can then talk about your competition. Every company has got competition, never turn around and say, I haven't got any competition. I'm say unique investors simply won't believe you on. Then you need a section on who the management are, and you can bring into this any advisors, professional or specialist. If you've got an advisory board, bring them in. If you've got some senior management people below the board, then definitely bring them in, explaining who they are and one of The key points about the management section is to highlight any significant gaps and what you plan to do to fill them in the management team . You then follow with a very detailed financial section, profit and loss account or income statement. Balance sheet cash flow. Often, you'll have, um, DCF model, which will be accessed through the appendices. You'll have other details. Then we come to the financial statements section, and here you'll get a have a profit and loss. An income statement, a balance sheet cash flow. If you've got a discounted cash flow model, it'll probably be in there. You may have some ratio analysis in there, but basically this is the section where you put all your major financial statements. Andi Information. At this point, if you're pitching for finance, you will need to include your funding requirements section Andi returns and exit sections, explaining to investors how much money you're looking for, how much your money you're gonna make for them on how you're going to get it back for them when you realize the money for them off when you exit the deal. The document then concludes with a management reporting systems section. Any risks associated with the deal, which can be quite a substantial section on. Then you have the time and space for all your appendices, which can basically be all the supporting documents you want to make available, along with a business plan. But if you put them in the business planet, box it out too much, so much better to put that sort of supporting information in an appendix. You can see all the detail of each topic in the outline, which has over already explain. You can download from the resources section off the previous lecture, so that is a quick run through a business plan. What you expect to find in it on the purpose off it. And I hope if it's a new topic to you, then I think you're I hope you'll find this lecture useful. 9. What Do We Mean By Corporate Strategy?: What do we mean by corporate strategy? It seems reasonable having discussed business strategy to look at corporate strategy because it's too easy to confuse the terms. Essentially, corporate strategy is the next step. Following the formulation off business strategy with business strategy, we've set the direction of the firm. What does the business need to do what they're manages inside the business need to do in order to achieve the goals and objectives set by the business strategy? So we then turn to the corporate status to see how that's going to be done. Remember that corporate strategy is taking a holistic view, is taking a view off the whole of the organization? Andi tryingto optimize it to achieve the strategy or be it adjusting for risk. So decisions have to be taken about the allocation of resources because capital and people are not in fluent. The design of the organization is critical. The management off the portfolio of assets within the business. Are we in this one? Are we not in that one, and indeed, the strategic trade offs, because you could never do everything, and you have to take judgments about where you're going to put resources and way you're going to not put resources. So we're really talking about the allocation of resources on people and capital when it comes to corporate strategy. Those are the two major factors. So let's look at people. First of all, when you're organizing your your business, you need to make sure that you've got people with the right competences on that. You've got people in the main roles in the firm who are competent to do them, and you are addressing those roles with the best people. That also includes making sure that the leadership off the organization from top to bottom has got the very best people in the right place. They are continually evaluating people and giving feedback and measuring them in order to promote on a train and see you know what you have to do to get the best out of your people . And, of course, people come, people go. You have to ensure the supply of talent to the organization to make sure that if people do retire or they move on that there is somebody else available to replace them. When it comes to the allocation of capital, then we're talking about risk adjusted returns, and you can measure this with hurdle rates and discount factors and that sort of thing. But essentially, we're measuring the internal allocation of capital and evaluating external opportunities to see whether we should be allocating some of the capital to external opportunities such as an acquisition. So you've got your two main areas in the firm, your people, and you got capital, and you have to decide how you get allocate and manage those two major resources that make up the primary resources of the organization. But we need to look at the four factors behind corporate corporate strategy in order to understand you know, what we're looking to do on the first of these is organisational design. Now, I put a whole load of bullet points up here, which I invite you to think about. Obviously, you need to think about how your head offices organized. Are you going to have a central head office? Are you in a dispersal authority? How much autonomy are you getting to give to your business units? And how far down does that go? Are you going to encourage bottom up decision making or you gonna impose top down decision making. What sort of reporting structures are you goingto have? Is it going to be hierarchical? You're gonna have some sort of matrix. How are you integrating business units on functions with the organizations to make sure there's no overlap. How do you get the right balance between risk and return in this organizational design, how do you develop centres of excellence? What element off? What level of delegation of authority are you going to allow? What governance structures do you have in place? And what reporting structures do you have a place so you can see there's an awful lot here to think about in terms of organization of the time. I know. When I did my m B A, there was a whole module on organizational design. So we only really just touching the top of the iceberg here when we come to discussing corporate portfolio management in terms of corporate strategy, Then we're talking about the management off the business units within the firm, and then we have to say, you know, which ones are we gonna be in which ones were not gonna be in? You know, you have to make decisions on do you can't just say we're going to be in everything. And you can't necessarily assume that what you're in now is the right. You know what you should be in in five years time. So you have to evaluate these. To what extent is the firm going to vertically integrate? What? How you going to manage the the risk through the diversity, diversification, off products and services. So how specialized you're going to be or how broad, broad brush and broad the are you an approach, the market? How you going to create strategic opportunities through investment? And these might be seeding new ideas Or it might be making acquisitions. Aunt, how are you going to monitor the external competitive landscape to make sure that the organization on the portfolio that you have remains appropriate and fit to compete in that landscape strategic trade offs? I don't go into these too deeply, but essentially, we're talking about the management of risk and return. We're talking about how you generate the best returns on what incentive structures do you put in place in order to incentivize people to create those terms? Because don't forget what you measure moves, and if you incentive eight incentivize people in one direction. You may actually end up with the wrong result if you don't design the incentives in the right way. Corporate strategy challenges management to create an organization which is greater than the sum of its parts. But it's on a risk adjusted basis. So you're not throwing stuff against the wall to see if it sticks and you're not taking enormous risks, which, if they don't come off again to sink the organization, you know you need to take make judgments and make evaluated, carefully considered decisions in order to try to achieve the goals set by the corporate by the business strategy. So it's on a risk adjusted basis, and you want the organization to produce the higher returns or high returns it can through the optimal management off the firm's resources. So that is what we mean by corporate strategy. It is the next step of evolution off working implementation. Once you've set the business strategy 10. Should You Be Creating Shareholder Value?: should you be creating shareholder value? And I want to raise this question because I think when you're putting your strategic plan together, you need to have a clear idea what your priorities are. Andi. I think the assumption that the whole focus should be on creating shareholder value is perhaps misplaced. It certainly misplaced in the second decade off the 21st century. So what do we mean by shareholder value? Well, it's the value deliver to the owners of the firm due to the ability of management to increase sales and earnings. The increased sales and earnings lead to increase cash flow, which leads to increased dividends and, ultimately, capital value. Well, that's all great so far as it goes. But how do you measure it? While you can measure shareholder value by the increase in the net assets the equity assets on the balance sheet, you can measure it by the return on capital employed R O. C. A. It's often in public companies reflected by an increasing share price, but it doesn't actually automatically benefit customers or employees. So while creating shareholder value is one of the goals of a strategic plan, there is no requirement to maximize shareholder value. And I think this is where the train comes off the rails because people look a creation of shareholder value and don't think about it in any other terms than maximization. Whereas I think it should be more of an optimization if indeed it's a specific goal at all . Management essentially have got four constituents to address, obviously the owners in the shareholders. But just as importantly, they've got their employees. These are people who are putting everything they can give into the business. Yes, they get paid for it, but they don't get paid half a swell, as the CEO does. Certainly, in most cases on day work very, very hard. Indeed. The supplies and channel partners also create considerable value for the firm and should be treated with respect and as partners. And, of course, the most important constituent off them all is the customer. And I think this is where a lot of companies have completely lost sight off their goals and their objectives. Let me ask your question, which is what is the purpose of a company? Peter Drucker, in 1974 said that the only valid purpose of a firm is to create a customer and I think that is a fantastic starting point for any business. However, Jensen Amec cling in 1976 in their paper theory of the firm Managerial Behaviour Agency Causton Ownership structure argued that the singular goal of the firm was to maximize the returns for shareholders on this. This philosophy this ethos completely has taken over the whole off corporate well, the Western corporate culture, particularly in America, certainly in the UK It led to the linkage off shareholder maximization to stop based management compensation. So if the management managed to produce an excellent result for shareholders, they got compensated with more and more. Stock management were effectively paid to deliver shareholder returns with little or no thought for employees or customers. Stock based compensation was supposed to lead to the rial performance of companies improving over time between 1960 1980 CEO compensation per dollar off net income for the 365 largest euros. Corporations fell by 33% between 1980 to 1990. CEO compensation per dollar of net earnings doubled from 1990 to 2000. It quadrupled again. Examples of bad practice to maximize shareholder value of things like looting the firm's pension fund, cutting back on workers, benefits outsourcing productions to foreign countries. And after the Corona virus that might be looked at again. I think it's a questionable practice. Jack Welch, CEO of G from 1918 89. To do. There's one from 1989 to 2000 and one that was a good 10 year, wasn't it? He he's almost the epitome off the CEO who could create shareholder value. But in 2001 he said, On the face of it, shareholder value is the dumbest idea in the world. He ski goes on to say shareholder value is a result, not a strategy. And this is the point I want you to take on board. Shareholder value is not a strategic goal. Strata. Shareholder value is something that happens if you get your strategy right, and he says, your main constituencies are your employees, your customers and your products. Roger Martin, in fixing the Game 2011 argues that to shift the focus of the organization back to delighting the customer while making an acceptable return for shareholders, Johnson Johnson had this huge Tylenol problem, but basically somebody tampered with a few tiny little packets in some obscure country. The market Tylenol was like 1/3 off Johnson and Johnson's revenues and profits. Huge contributor on the CEO could have covered it up, but no, he didn't. He re called every single bottle of Tylenol in the market. He had the lids changed her, that they were tamperproof, something that became standard across the industry. And he was completely public about it because he put his customers first, his employees second and his shareholders last apple. Steve Jobs, one of the people I respect most in corporate life of the Amazing Man. He said his objective was to make a contribution to the world by making tools for the mind that advanced mankind nothing to do with shareholder value. He was asked once what keeps you awake at night? And he said, shareholder meetings. He hated them. So I encourage you strongly in putting your strategic plan together, shift Europe's strategic objectives away from simply talking about shareholder value. Don't even think about it as a strategic objective. It is going to be a result that happens if you get your strategy right. Focus on delighting your customers nurture, take care off and develop your staff there, your greatest asset inside your firm partner positively with your supplies and channel partners and above all, make excellent products. And if you do that, get ALS those right then you will create shareholder value but don't set out to try to create shareholder value as a strategic goal. 11. Introduction to Strategic Management: welcome to this introduction on strategic management. This is a no overview off on approaches region strategic management, which I hope will give you a framework with which to understand this topic. Essentially, strategic management is the setting off the goals and objectives by the senior management off a business which seems pretty straightforward. We're gonna set out and set this organization on a direction going into the future. Now Michael Porter, the Harvard academic who has written extensively on management strategy, identified three principles underlying this strategic approach. Firstly, the organization has to create a unique and valuable market position in order to compete in order to differentiate in order to be competitive. In order to achieve that, the management have to make tradeoffs. It's as important what they don't do as what they do do on. Therefore, there are decisions to be made, and if you like forks in the road on directions to be chosen, so that's very important. And finally internally, the organization has to organize itself on fit its internal organization and structure and capabilities to meet the external objectives and goals set by the management. So the question that corporate strategy essentially asked is What business should we be in on business? Strategy asks. How shall we compete in this business on this sets the organization's purpose on vision. Strategic management as a on exercise comprises off two major processes. There's the formulation off the strategy on the implementation of it. On these are tube a distinct phases, although they continuously it rate. So you learn from your implementation. You go back and evaluate or formulation. You change the formulation and you implement again. And so it goes around and around and you're continuously learning. Let's take a look at formulation briefly. Essentially, the steps are that you're analyzing the external environment that the business operates in to make decisions about how the the organization's gonna complete. And you use that to set a Siris of goals and objectives for the organization. So these strategic decisions have to address the following. What is the business? What does it do? Who are the target customers, where the customers and how did they buy on what defines value? Because if you don't create value for customers that you're not going to be in business very long. What is the geographic scope of the business going to be what differentiates it from its compact competition. What skills and capabilities are required to execute the strategy? And, of course, what are the opportunities on what are the risks? So the strategic decisions also then address Can the firm grow? And if so, how is it going to grow? Growth is a critical component of strategy, Aunt. How can the firm finally generate value for its investors? And that is this of the end goal. If you like off creating profitability and a return to investors when we look at implementation were asking about questions like how to organized the resources within the business to achieve the goals and objectives on what business structure do we need to do that, what leadership do we need them? And there's a whole hold, wide range of discussion around leadership issues which we will get onto. But the leadership off this organization if you're going toe execute, is absolutely critical. And of course, then you want very broad based issues around operations management. So if we step back and we say you know what are the key steps here? We've basically got under formulation analysis, strategy of formulation and goal setting and then under implementation, we've got structure control and feedback. So those are the five steps under the two headings. We look at the analysis part. We're looking at the external environment, the industry environment, on the internal assessment off the organization. Step to the strategy formulation can can actually cover a very wide area, but diagnosis or things like the SWAT analysis, the strategic evaluation of the business. So we're looking at things like competitive advantage, that generic strategy of the business portfolio, management of the assets within the business, on the products and services, the geographic scope of the business. It's positioning in the market, the value chain and core competences. If we turn our attention to gold settings, what are we looking at? We're looking at guiding policies, objectives, corporate business and functional objectives. And, of course, we're looking at measurement and scorecards to make sure you have some way of assessing where these objectives are achieved under structure. We're looking at the organizational structure. We're looking at the leadership structure. We're looking at initiatives, programs in investments which are in place to help the execution, and finally we have to evaluate whether we have to make mergers acquisitions and divestitures. The control and feedback part of this is all about budget and financial planning, having the right incentives in place on then being able to review and evaluate the results so you can go back and start the planning process again. So I hope that gives you a structural evaluation off strategic management. We're going to explore a lot of these topics in a lot more depth, but this is a framework on which toe hang your ideas and your understanding of strategic management. So when we start to talk about some of these issues, you understand where they fall in place. 12. BUSINESS FUNDAMENTALS The Value of Strategic Analysis: business fundamentals. The value off Strategic analysis section Learning Objective Understand the main frameworks for strategic analysis on be able to complete a SWAT analysis section introduction. This section provides a high level introduction to strategic analysis. We are deliberately starting from the beginning. We explain the main framework for strategic analysis and introduced some of the main business school models that you will be using throughout this course. You will become much more familiar with these as we go through the course. This section concludes with your first assignment, which is a SWAT analysis off Apple Inc At the end off this section, you will understand the key components of strategic analysis that will enable you to start mapping out the initial outline of your business strategy. 13. Strategic Analysis - The First Step: the first step, then, in formulating a strategic business plan, is to address the issue off strategic announces. So we've already looked at a framework for how we're going to put together our business strategy. We have two phases, the formula formulation phase and the implementation phase on. We have identified that analysis is the key critical first step. The analysis involves three main areas the external environment, the industry environment and then the internal assessment off the business on. We're going to look at these in quite some detail in subsequent lectures. But before we do that, I want to take a look at what we mean by strategic analysis. And I want to provide some high level frameworks to provide context for the analysis phase off this business strategy formulation part off the process. So what we're going to do now is take a little look at what we mean by strategic announces . We're going to go into a little bit more debt. We're going to look at some frameworks around it on then we in subsequent sections. We're going to go into a great deal more depth through this analysis. Face to really get under the skin off how we conduct a corporate analysis which will give us the tools and the frameworks we need to put together our business strategy. So I wanted to introduce this topic because strategic analysis is absolutely critical. But there's a lot to it, and there are a lot of frameworks or a lot of business theories on. I want to set this up really well. So you've got a very clear structure and very clear frameworks coming up that will help you to understand how ugo about strategic analysis. 14. What is Strategic Analysis?: so we need to take a look at strategic analysis to understand what it is and what we are supposed to be doing. In essence, we are researching the company on its external environment, so researching the company internally and externally, we want to identify and evaluate relevant data which will help us make strategic decisions on that means we have to define the internal and external environments that were evaluating on. We also have to identify the industrial in the industry environment in which the business is operating. So we set out these three areas for analysis internal, external and industry, which we talked about before. Now, before we dive into that, I think it's important to take a little step back. And if you're in an organization, you really need to believe and understand what that organization is about. And what I'm talking about is vision, mission and values, because if you're going to do an analysis, you need tohave some benchmark some guidelines to steer you as to the sorts of decisions you should be making on a qualitative not just a new miracle basis on these are what are going to help you so from the outset, these three things need to be clearly defined. Vision is what the company wants to achieve in the next 5 to 10 years, and that's going to help you to look out for word on science, a one in 10 years time. We want to be doing this. So this is if you like our long term objective, our vision for the future. The mission is at its heart what the company aims to deliver, what it aims to deliver for its employees and for its customers. And I think it's fair to say, Let's say as well, you know, for its suppliers and for any anybody who's involved if in the business and perhaps even also its investors. But the company has toe have a mission statement that say's very clearly what it's about and what it's trying to achieve on. That's a delivery of value delivery statement to its customers and to its employees. It's not a long term statement. It's a very much in the present statement about what the company stands for and values are critical. What does the company believe in? And here we're really talking about ethics and moral issues. Is green environmental climate related, whatever it is. But the company needs to be seen to say, Take the higher ground on many of these issues, Aunt, have a clearly stated set of values. Google's basically said, Don't be evil. Unfortunately, you know that may or may not have been successfully implemented, but you need to have something that communicates your values and what the company believes in. So let's then look at the strategic analysis and the analysis itself breaks down into four phases. And if you're conducting your own announces, this is what you need to think about. First of all, it's the environmental announces off current strategy. So what are you doing at the moment? And how is it working? You know how successfully you being, so you need to determine the effectiveness of those strategies. You then need to start thinking about alternative strategies, which may offer you different visions of the future different alternative ways off going forward, and then you need to evaluate those and be able to recommend an implement the most viable strategy. So that's the purpose of the analysis. Look at what you're doing. Look at how effective it is for formulate alternatives and then try and pick the best one to go forward with. We're talking about strategy at three levels within the organization, and again, this framework will help you to to form some sort of matrix. The top level is the corporate level, and essentially, we're talking about how the business, how the company will sustain its competitive advantage by having the right combination off business units at the next level down. We're talking about the market positioning off those business units, and then at the bottom level, we're talking about the functional level. How functions within the business units into relate to make sure that you get the smoothest , most efficient process throughout that business unit. So I hope you find that a helpful Siri's off frameworks again. I'm encouraging you to think in a structured way around how you're going to conduct your strategic analysis, and if you have these structures in these frameworks, then you can go and take them. And for each one you can discuss with your colleagues how they apply to your business. 15. Frameworks for Strategic Analysis: take a high level. Look now, at some frameworks for strategic analysis, as we've already see, putting our strategic business plan together involves two phases formulation and implementation. On the first phase of this is analysis. But the question that I haven't answered and I want to introduce you to now is how do we go about this analysis? What tools can we use to help us think objectively and analytically about our business? Because without such frameworks, without these tools is very difficult to make judgments and to make evaluations just by looking at the business itself because you have nothing to measure it against, you have no framework told. It's bit like trying to change a wheel on a car without a jack and a spanner. So let's go through a number of these. I'm gonna look a lot of these in a lot more detail in the next section, but in this section I just want to introduce them to you because if you are new to some of these, then again, I want to get them in your mind and show you that there are a range of different tools before diving into them in great detail that you can use on the first of these is portfolio theory, and portfolio theory is very straightforward. It makes you look at the assets in the business as you would like a share portfolio, and you're basically saying for each asset, Are you getting a inadequate risk adjusted return from those assets so you can do cost benefit analysis to review your resource allocation of assets within your business. On this helps you to financially evaluate whether you've got the right mix of assets with the business, because you might be able to find a different asset, which will give you a better risk reward return than the current asset you have in the business. The growth share matrix is a Boston consulting group grid. They like these four square grids on it, basically, at an individual business level, looks at two axes, market shot and industry growth rate. Andi. Clearly, the market share is a measure of how competitive the businesses in them in the market. On the industry growth rate is a measure of how attractive that particular industry is, and it helps you to see where your businesses are positioned on. Therefore, you can make evaluations about which ones you should reinforce with investment on which ones you should pull Investment back from. Core competence is, um, a technique which argues that your business should be the best at what it does in the market, and you should just focus on that and anything else that doesn't contribute to reinforcing your businesses. Core competence should be disposed off. It helps you to establish your business with a very strong competitive position On the very clear market offering to customers, the experience curve is relatively straightforward as well. Basically, it's saying the more you do of something, the better you will get at it because when the volume of output goes up, the costs, the value added costs declined by consistent percentage. So the more you do, the better you get. And the less it costs you, I'm sure intuitive. You can understand why the position, the the experience curve is coming from now let's look at a number of the great Michael Porter's models, and I really like Michael Porter. And when I was doing my M B A back in the early 19 nineties at CASS Business School, we studied his his work, a lot on read a lot of his books, and the first of these is competitive advantage on the argument here is basically looking at the market position of your business Compared to your competition on Michael, Porter argues that you can only really have one of two viable strategies. You can either be the low cost producer, in which case you can have the lowest costs. Those prices in the market and compete and everybody else either loses money because they're trying to reduce their costs, reduce their prices to match yours on their costs are too high, or basically they go out of business. The alternative is to differentiate your product so well on Apple iPhone, for instance, that actually it's not a question of price. The product is so brilliant and say unique people will pay whatever you ask for to get their hands on it. On DSO. You know there's two very different approaches to the market, but you have to adopt one or the other, and if you fall in the middle, then competitors on either side of you with one strategy or the other will out compete you Essentially, it's a focus on brand on products and services. Michael Porter's generic competitive strategies off cost leadership and differentiation basically encourage you to create economies of scale in order to achieve low cost production or specialization to create a new unique products which are not price sensitive . Michael Porter's also got a model, which is his five forces model. On this looks at the industry structure and its compact come eyes profitability. The first of these five forces is the threat of new entrance. And if you think about the company being in the middle, then basically coming from above, you've got the possibility of do people coming in and taking market share, disrupting the market. If the markets attractive and competitive, it will attract new entrance. However, if there are barriers to entry, such as intellectual property rights count, high capital requirements, strong customer loyalty, existing economies of scares, it makes it much more difficult for these new entrance to come into the market. The threat of substitutes means basically your products are easily duplicated by somebody else. So if I made a box of tissues, it's not very difficult for somebody else to make another box of tissues on. It's easy for customers to look on the shelves and saying, Well, there's this box of tissues here, all that box of tissues there. Which one am I going to go for? Which is why tissue boxes tend to be quite stressing, a strongly branded to try to build customer loyalty. The bargaining power of customers enables customers to keep prices down against sellers who want to increase their profitability. And it's this tug between. If a customer has a lot of choice in the market, then they can play one seller off against each other and keep the prices down. If the seller is selling a unique product in the market or there isn't a locally available alternative, then they don't have that power and the seller consent the price. The bargaining power of supplies is the reverse of that. This is where if many suppliers have access to the raw materials, then they will have veritably weak power because the buyer will be able to play one against the other. However, if there's a supply with their access to a unique raw material and you can't buy it anywhere else, they can set the price they want for that raw material. And finally the issue of competitive rivalry. It's really how competitive is the market. And if you have a highly competitive market, you the market would encourage you to continue to develop your product and innovate in order to try to move away from your competition. But a highly competitive market will keep prices keen and make it difficult for people to raise their prices. Let's look at SWAT analysis, strengths, weaknesses, opportunities and threats. A classic piece off strategic announces, which enables you to look at the internal part of your business strengths and weaknesses and then the external market, your business and the industry conditions, opportunities and threats. So again it sits across to and indeed three or three off the areas off. Our strategic analysis, which are the internal. The external on the industry value chain is where you'd look at the primary activities of a business horizontally, which are the inbound and outbound logistics than operations marking ourselves and servicing. So you're looking at the value added from the raw material coming into the firm and seeing way, you can get efficiencies and cost savings and short and make the process internal prices and more efficient. Underneath that you then have the support activities, things like human resources, technology, procurement and infrastructure, which again helped those that main band you chained to operate on. What you're looking for in your strategic analysis is how to make that process better, more efficient, more cost effective. So that's an introduction to strategic analysis frameworks. I'm hoping Teoh, while I will go into these in a lot more detail. But the purpose of this lecture was to introduce these ideas to you so that when we go into them in more detail, you have reference to where they sit in comparison to the others, and you're beginning to get an idea off strategic analysis on how to best conducted for your business. 16. Strategic Analysis Case Study Apple: in this video, I want to use Apple as a case study to look at strategic analysis and some of the models we've addressed already. So this is a follow up to the previous lecture. We're gonna make it a relatively straightforward case study. I'm going to focus on Apple and the iPhone but will allude to other products and competitive on. We'll go through some of the models we've talked about already, and I'll show you how you can use those to gain insights into Apple's business. So let's start with portfolio theory, and you have to think about all the different product businesses that Apple have got. I've listed some of them here. The Mac, the laptop, the iPod, the iPad, iPhone, eye watch, airports, iTunes, Apple pay and they're getting into or some other things, like streaming and TV and cloud services. But you need to think also about the portfolios. That or some cracks in there. Hopefully, they discontinue, so the iPod was discontinued. The apple car they've changed, and they've moved to looking at self driving software rather than trying to build their own car. And what they're doing is they're taking each product and each business as his product and evaluating them on a standalone basis to try to judge whether they should be investing further in that product or not on in case of the iPod. Because you can get all this function afternoon on the iPhone now they've effectively discontinued the iPod so you can see how their business has changed and how they can take their range of different products and services. Andi individually assess them on make investment decisions on the basis of that assessment . When we come to the Boston Consulting Group Growth Share Matrix, you can see the four segments, and I've actually put them on the screen for you here, and you can see that a high growth, high market share business is regarded as a star. Ah, high growth. Low market share is a question mark, and what that means is because it's got high growth. But it's it's got a relatively small market position. Are you going to put more money into this to try to move it across so it has high market share, or is it going to struggle and then end up not making you money? And therefore it's a waste of money to make that investment. It has low growth but high market share. Then it's a cash cow, which means that you don't have to invest very much money in it because it's a low growth market. But your high market share means that you're chucking off cash, which you can use to invest in other businesses. And then the low growth, low market share is a dog. This is a business which you probably want to get out off. You know, it's not a very exciting market, and you haven't got a significant position in it. So think about Apple's product range. You know, where would you put the different products we've just discussed on this? This bread, Ah, lot of apples markets are high growth, but you could argue that the smartphone market is actually approaching a period off maturity and that a lot of the growth has come out of that market on. They still have a reasonable market. Share will be around 25% so that's probably more of a cash cow than a then a star. On the other hand, of course, it's highly competitive market. It still requires a lot of investment to keep it, you know, to keep that market share position. So maybe it's it's somewhere between the star and the cash cow. So think about the different products and services that apple offering and think where you'd put them on this matrix. When we talk about Apple's core competence, then you have to start thinking about one of the things that make the business unique. Well, you know, it has found some fantastic Elektronik consumer products, which are very distinctive in the market. So that's clearly a core competence is brand is fantastic, globally, highly respected, and that itself has a North a lot of value and is part of its confidence. The fact that they put so much effort into reinforcing the brand with style of the design, it all adds up to something that nobody else can actually copy. Of course, they're very strongly designed lead on their very not price driven. So you can see that that their differentiation onder the uniqueness of their products, is a core competence, and they're not just trying to be used a low commodity product. If you think about the experience curve, let me invite you to think about the original iPhone and then think about the iPhone 11 Max Pro, which is probably the best iPhone they've ever produced. Some. What is it 15 16 years on? So the experience that they've gained over that period of time from the original iPhone to this amazing iPhone that they're producing today is quite remarkable. And they've benefited from that. Both the functionality of of the phone, the benefits off the the phone and the experience for the user and versus the cost. If they'd set out to build the iPhone 11 Maxwell one, they probably couldn't have done it. But secondly, the cost would have been absolutely astronomical to put all the function outing they've got in there today. But they've been able to do that over time because they've learned from their experience. So it's need evolution of the hardware and software, and as the experience has gone up, the products improved. But it hasn't had a community that that extra functionality and benefit hasn't had a pro rata cost. The cost, relatively speaking, has gone down. If we think about competitive advantage, this is so clear cut with Apple. Are there low cost producer or their product differentiator and they are absolutely, ah, product differentiator. They have no interest in trying to sell the cheapest products in the market quite the opposite. They're very happy to sell the most expensive products in the market because they have absolutely top end, highly differentiated brands, products and services. And if you think about the Apple brand, you think about every Apple product is. It's at the top of its of its price range, but also its quality and its designers functionality in its market. On the same goes with Apple services. This one is black and white. Let's talk now about generic competitive strategies of cost leadership coaches versus differentiation, and we've alluded to that in the so previous thing. But basically you can either go one or the other. And if you don't do why the euro left in the middle. And of course, Apple is clearly a differentiator. It's not a cost leader doesn't want to be, and it's avoided getting sucked into that middle ground. It's been very, very successful in positioning itself at the top end off the differentiation market. It has a unique product which is not price sensitive in the market. When we address pry Porter's Five forces. Let's think about the threat of new engine entrance. Well, that is constant in that market. You know, there are always people trying to break into Apple's markets because they're so profitable . You know, high tech markets are very, very attractive markets globally. So how do they protect against that? Well, they make their products very, very high tech, and they have all their software in house. They have loads of intellectual property and patents. They strongly depend on their customer loyalty to protect them on their existing economies of scale. They because they are such a vast producer of these products, they do actually do get benefits of scale. But they keep the benefits for themselves and still send you sell you a high price products , which is why the company is so profitable. And of course, the brand is very, very good barrier to entry to stop people coming in because would you buy and no name phone , or would you be more attracted towards an apple phone on? I give for the apple fan every day of the week. Fetter substitutes Well, yes, of course, there are lots of substitutes out there. There are lots of similar similar products. But do they have the same benefits? I mean iPhone and Samsung. It does seem that Samsung is a very similar product on day. Do try to position themselves as a competitive to the iPhone, but at a cheaper price point. But what happened to Nokia? What happened to BlackBerry? So there are threats of substitutes, but so far they haven't really succeeded. In my view of knocking, I am Apple off their iPhone pedestal, the bargaining power of customers. Do customers really have any bargaining power? Well, it's very limited. When did you last get a whopping discount off an Apple product? Even on Black Friday? The deals are very, very limited indeed. So fundamentally, customers don't have much buying bargaining power. Do the suppliers have any more bargaining power? What it's actually quite difficult to discern, but I think it's very unlikely that will be significant because Apple isn't really getting anything of high value or from its supplies that it couldn't get from somebody else. Yes, I'm sure it has got some very dedicated manufacturers and they're working very hard together on the tooling and all the rest of it. But frankly, if Mike If Apple wanted to go and do that with a different manufacturer, it couldn't do it overnight, but it could do over a period of time. So I don't think the supplies have a very strong position in regard to the Apple's market position. Competitive rivalries. These are very high, but it means that it keeps innovation I and that's the way Apple competes. It has an annual product cycle for most of its products, and it's continually adding new products and services and continue to upgrade and develop those that it has. So, yes, there's a lot of competitive rivalry. But Apple's high innovation rate is how they compete with that. And it's the fact that they're having to do that shows you that there are very high levels of competitive rivalry in the market. Now let's come to the SWAT analysis because this is where I want you to do some work. SWAT analysis is, we believe, what strengths, weaknesses, opportunities and threats. And in the assignment that's coming up after this video, I want you to do a SWAT analysis on Apple. Okay, I've provided my thoughts in the answers, but I want you to produce at least three points for each of these on then compare them to my answers and their shared the assignment with the team. So that's as far as I'm gonna talk about SWAT analysis In terms of the value chain, apples are highly integrated company. They produce their own hardware. They produce their own software. They keep all their high intellectual on high value functions in house. They don't depend on third parties for any value of critical element off their products or services. Yes, they do outsource our manufacturing to China and to other parties. But they're keeping all the smarts and all the clever bits inside all their critical functions. Our in house. And if you think about it through the value chain and through the supporting aspects of the business, you can see how that is the case. So that's my case study on Apple to give you some thoughts about how you can use these models to think strategically about a business. And now I want you to go off and do the SWAT analysis assignment that I've set for you 17. Strategic Analysis Assignment - Apple SWOT Analysis: this assignment, I want you to take a look at the Apple company and to conduct a SWAT analysis. We've gone through what SWAT is involved in, but it's think thinks it would be helpful for you to start thinking strategically and to actually put this analysis together. So what I want you to do is to think about the products and services that Apple offers its supply chain that also think about the other models we've discussed on DSI what you can draw out of your interpretation of those models to identify strengths, weaknesses, opportunities and threats. So think about Porter's Five forces. Think about it's the company's market position and these competitive position using again Porter's generic competitive model, and also think about internal and end external aspects of the business to see what ideas then come up to you. So you have. This matrix is four by two by two Matrix Foursquare's Think about the act axes, internal and external positive and negative strengths, weaknesses, opportunities and threats and see what you can identify for each segment on what I'd like you to do in the assignment is to try to come up with it. Least three points for each segment. That's all three points now accompanying this slide deck in the appendix. I've given you some sheets. If you want to write on them, you don't have to use them. But if you do want something to write on, then there's a little set of slides there which you can use to print out on right on on. Then, when you've done the assignment, then submitted to the course, share your thoughts and ideas with other students. And I could be absolutely certain that the points that I've put in the solution because there is no right or wrong to this are going to be different to the points I've come up with, which is great. That's the whole point about doing strategic analysis. There's no exact answer to it is not a science is as much an art, and your ideas are as valid as mine on. By putting our thoughts together, we get a much broader range of ideas, which we can then analyze more thoroughly. So that's the purpose of the assignment for you to conduct your SWAT announces on Apple so that we can share it with the whole off the team and see what we come up with a case. I look forward to seeing your ideas on Apple SWAT analysis. So that's it for this assignment. Go ahead, print off the sheets if you want to, but get thinking about Apple on its strengths, weaknesses, opportunities and threats. 18. 4 BUSINESS FUNDAMENTALS Frameworks and Theories Business Strategists Must Know: business fundamentals, frameworks and theories. Business strategist must know. Section Learning Objective Discover Some of the key strategic business models taught a business school providing you with a toolbox of frameworks to apply to your business strategy formulation. One of the most useful takeaways from my MBA was discovering business models and theories, which provided me with a toolbox from which I could tackle business problems. We have included this section to introduce you to an important selection of these, many of which we will return to in later sections of the course. Many of these frameworks over lab and many benefit from being used in combination. There is no right answer here, just the challenge of using the model to examine the problem in front of you and seeing what insights you can discover by following through the systematic approach off the model or theory to shed light on your business. We explain why we think they are important and useful. If there are models you would like Further explained, Please reach out to us, and we can add them to this section of the course. You will also find your second assignment, which is a quiz about the business models you're about to be introduced to. So pay attention on, then do the quiz without going back to look up the answers. How many points can use school? At the end of this section, your business strategy toolbox will be filled with a selection of frameworks and theories that you will be able to use as you work through this course and beyond. 19. Why are these Business Models important?: Why are these business models important? This is a question I want to ask you, and I want you to ask yourself. Business models are key frameworks for any strategy analysis. They are the tools that you can use to apply your strategic analysis to work out what your strategy should be. These were one of the major takeaways I had. I took away when I completed my MBA at CASS Business School in the early 19 nineties. And although that was nearly 30 years ago on nonetheless, these models are just is relevant today, as they were even as far back as that. And indeed further back from that. If you go back to the origins off them, they're being fundamental building blocks and keystones off ST E strategic analysis. And they're really, really important. So I want to introduce them in this course to you early. Andi, I want to you to be thinking about the man to understand that because we will be referencing them all the way through the course and you will be using them all the way through the course, so they're really, really important. So I want to get them to you early and get you understanding what they are so that we can refer back to them. So this is a section you need to work through. You need to have the basics off these models, not because you have to know them off path. But you need to understand that these models exist and what they can help you to do, because we will refer to them. And when we do so, you'll understand then what their significance is. But equally, this sections also somewhere you can come back to because it gives you a reference source that you can check back to refresh your memory about the models. Think about ideas in your mind. What, you're going through them again. So it helps you to to double back and to refresh yourself if you need to do that. And, of course, if you come across a model and you think it should be in this section, then definitely let me know. Give me the feedback and I'll do my best to produce Electron it. So we brought up a nice a library off these business models because they're incredibly useful, really important. And if you're serious about strategy announces, then they're very important that you should understand them and you should be able to use them. So that is why business models are important. And that's why these business models are important. And that's why I've included them in this section of the course, and I really hope you're gonna benefit from understanding them, and you're gonna enjoy using them. 20. The Tale of the Hedgehog and the Fox: tell you now about the tail off the hedge, Hoke and the folks. And no, I haven't lost the plot. I want to refer you to an essay by the philosopher First I sire Berlin, which came out in 1956 about the hedgehog and the fox. What Berlin does is he divides philosophical thinkers, but we can take this metaphor on into two types hedge hawks and foxes on what I'm going to show you is how we can apply this approach on why it's useful to apply this approach to business strategy. Hedgehogs view the world through the lens of a single, defining idea. But Fox's draw on a wide variety experiences and for Fox is the world cannot be boiled down into a single idea approach or philosophy. So the hedgehog knows one big thing and interprets everything he comes across in the context of this one idea. But the fox knows many things, and the fox draws on a variety of tools. Depending on the problem, the fox listens toe. Other opinions. The fox is agile and nuanced In interpretation. Fox is always seek the data that can provide a more comprehensive picture. You can see where I'm going with this country. As a consequence, the Fox makes far superior decisions and judgements. Now we all know that everybody doesn't like to admit that they're wrong. But in the light of new evidence or new information, foxes will change their position. Hedgehogs stick rigidly to one position on. Then argue why the new evidence is either irrelevant or unemployed. Kable or whatever else, um, just stays focused on that idea. My point is that good business strategies are foxes, not hedgehogs. And it's why we they we as business strategies need a wide variety of tools and approaches to make the best informed decisions and judgements about business strategy that we can. So I want to strongly encourage you to be a fox and not a hedgehog on. This is why I'm going to present you now with a whole range of different management theories, thes air, the tools, the wide variety of tools through which you can help yourself to think like a fox and not a hedgehog 21. Why Are Management Theories Useful?: want to take a look now on Discuss? Why are management theories useful? Management theories are frameworks and concepts which help us to interpret business strategy, and this has been the key take away I got when I did my MBA CASS Business School. Back in the nineties, I came away with a whole set of frameworks, a whole set of tools, which enabled me to interpret the businesses I saw around me. So they encourage you to look at businesses through different prisms through a different set of viewpoints so that you can look at them and make critical evaluations. But with a set of rules and guidelines to help you interpret what you take a look at now in business strategy, there are an infinite number or variations. As you can imagine, you can look at any business and find differences to the business next to it. And of course, there are good strategies, and there are bad strategies. However. Ah, good strategy for one company can be a bad strategy for another company. Let's look at Apple. We've discussed Apple already. What if Apple decided to sell all their phones for $100 each? Because they want to increase market share. Do you think that would be a good strategy for Apple? Well, if you've done the SWAT analysis assignment, then you're probably company conclusion. It wouldn't be. Let's take a look at the number of these approaches of the imagine theories, and the 1st 1 I want to talk to you about is scientific management theory. This was devised by an American mechanical engineer, Frederick Taylor, who piled it quite a long time ago. Now he looked at 19 century work and saw that the main motivation waas to from the employer's point of it was to try to make their people work as hard as possible. Frankly, for as little as possible, with no real care about them. They're well for anything else on the stick that they held against them Waas that they would lose their job if they lost that job. That often meant they lost their housing and then they'd have absolutely no income and there was no welfare and all the rest of it. If you think about how people were treated in the cotton mills in the 19th century, you'll understand exactly what I'm thinking about. However, Taylor argued that actually what motivated people was money, money was the incentive for working, and he coined a phrase a fair day's wages for a fair day's pain. Now, when you take that approach, you can start to look at work the workplace in a very different light because you can basically say that people are working for a completely different incentive. In this case is money rather than the fear of losing their job. So you can start to standardize workplace practices and rules. You can simplify the organization and tasks because it didn't matter if one person was doing. You know, we're doing different things as long as you could organize the task and get them working together in a scientific way and work became a collaboration as well between employer and employee. The relationship was bound together by money, not by the stick off, trying to throw you out off a job systems management theory takes a slightly different approach and basically argues that business is a system a bit like the human body with lots of different parts, and they have to all work together for the body to thrive and to stay alive. So organizational success in systems management theory depends on synergies, efficiencies, interdependence and inter relations between different substance set systems. So your heart has to work with your blood system to pump blood around on. The blood system has to provide oxygen to the brain. And if the brain does that, then something else does this. You see what I mean. Works works as a system. Another good example of this in business is the value chain. The Value Chain is a system with one part of the system one part of the value chain, depending on another. In systems theory, employees are one of the most important elements. But there are also different different subgroups and systems in their departments. Workgroups business units on the challenge from management is toe optimize their system within their organization. Toe work to the best possible effect works for the get the best possible results to make the most profit. But they're encouraging different parts of the organization toe work collectively and collaboratively rather than as purely as isolated units. Contingency management, devised by Fred Fielder, basically argues that no one management approach suits every organization on this Israel Fox, thinking he's basically saying there are lots of variables internal and external, which effect which management approach is best. And the manager has to, you know, work on the flight has to respond to the challenges to the inputs and all the rest of it and the traits of the manager. The traits of the leader directly relate to how effective they are. But Fielder argues that leaders must be flexible to adapt to a changing environment, and they need to have different traits and different approaches, depending on the circumstances they find them in. So you can't say that you have to do everything one way. You may do one thing in a particular way today, but you may have to change your approach tomorrow if there's a different challenge. So there is no one specific technique for managing a company. Leaders have to be quick to adapt to the most suitable management style for a particular situation. Theory, X and theory. Why really postulate two opposite approaches to the way you look at the management, But they basically say, depending on which viewpoint you take, then you have to adopt a particular style. This was devised by Douglas McGregor, and he basically has two contrasting approaches. And the 1st 1 is the authoritarian approach, which is theory X on the 2nd 1 is the participant participative approach, which is theory. Why now? In theory X, which is a pessimistic team members are not passionate about their work. They're not incentivized. They're not interested in order to get them to work. Management has to be authoritarian and basically has to force them to work. Set strict rules really cracks the whip, and it takes a very hard line approach. They re X in theory why it's the absolute opposite. The team members are enthusiastic and committed and keen to learn and keen to move forward . So what does this mean? It means that the management can adopt a participant participative style off management and can work with their team members to collectively get the best result. You can see the contrast in the tube, so the approach taken by management will then affect the performance of the team. And so the management has to evaluate what the people he's got and then, you know, react accordingly. I mean, in my view theory, exes is not place. I'd want to work. They re X is pessimistic about employees who need motivating. They need the the whip to be cracked. They need a stick behind them to get them going. And it's very, very tough environment working. I should imagine theory. Why is the absolute opposite? It's optimistic. The team members are very keen to get on a work, and they want to all work together and grow. And it's a very much more interesting and much more participative environment to work in. And that means that the management can take a completely different approach in the way they motivate and organized their team members. So how can management theories help with business strategy? Exactly. Well, I'll give three suggestions for you. Firstly, clearly, if you can use these theories to improve the organization, the way it's lead, the way it runs, the way it's performs, then you're gonna improve your productivity, and you're going to get the most out of your people, and you're gonna be more profitable. If you could get a better organized organization that will probably lead to you having a flatter hierarchy and faster decision making, so enables you to simplify and speed up decision making, which is a huge plus, particularly in a fast moving market and finally, the whole issue of staff participation. If you understand these theories, then you can tend develop interpersonal relationships within the the workplace environment that will help the organization be more coherent, more collaborative, on. As a result, apart from being a much better place to work, will be a much more effective organization. So that's a quick, high level. Look at management theories were really what they are, but also why, on how you can apply them to businesses from quite a high level on why they can actually help your business. 22. SWOT Analysis: want to introduce you to the SWAT analysis framework, which you may or may not be familiar with. It is, however, one off the cornerstones off strategic analysis. People almost take it for granted. It's so prevalent it has a number of advantages, the first of which is it covers both the internal and the external environments of the firm . So we look at the strengths, the weaknesses, the opportunities and the threats. This is shown on the graph here and you can see on the left hand side you have the strengths and the weaknesses which are predominantly internal on. They are predominantly in the present or historic, and then on the right hand side, you have external factors, which are opportunities and threats on. These are predominantly forward looking, so strengths and weaknesses are current or review that historic performance and opportunities and threats anticipate the future. On this time, balance is an important distinction to be aware off. So the internal factors that you might consider when evaluating strengths and weaknesses are the culture of the organization, the brand image and its awareness, operational efficiencies, the operational capacity Does the firm have enough capacity for its current level of production, its market share is that growing? Is it shrinking for the financial resources in the firm? Is the firm financially stretched, or does it have reserves enough to keep it going, Moving forward and growing the key staff? This isn't just a management, but this is a way down at every level because you want tohave good people in your organization you can bring on. But you must make sure you don't have any weaknesses in your structure so that things start to go wrong at critical points. And, of course, you need to look at the op organizational structure and ask yourself whether it's optimal for what you're trying to achieve. Then we can turn to the external factors, opportunities and threats. There's the whole issue off what's going on in society. Do your customers like your products? Are there segments of customers you can identify that you might be able to sell to what your competitors doing? What sort of threats do they you know, potentially opposed to you or other opportunities? You can exploit their looking at the whole economic environment where we're in the middle of the Corona virus pandemic. As I'm recording this the economic environments looking pretty grim at the moment. How is that going to affect you? You need to look a regulation, particularly government regulation. You know what your suppliers offering other opportunities there to get better supplies? Or is there a threat because one of your supplies may go away? Or is it charging you too much? Do you have strategic partners that you can do something with? And what are the broad market trends and are they running in your favor so you can can't have drill down and find key questions? So when you're looking at strengths, you ask yourself, You know what your competitive advantage is? What your unique resources, you know, What is your unique selling point? What do you know about your brand image? What's positive about your brand image and what low cost advantages do you have that nobody else does when it comes to weaknesses? What basically, what does your company not do? Well, what are your custom of perceptions and feedbacks? What? What are you hearing back from our customers that you can improve on and what brand image weaknesses do you suffer from these questions? Airil broadly out there there's no correct answer to them, but I'm just trying to give you something to simulate some topics to think about. When it comes to opportunities, You you need to look at what the opportunities are in the market, what the opportunities are in terms of the trends in society and in the market, how technology and innovation may positively impact and give you new opportunities and what societal changes are running in your favor. And, of course, you flip this round when you're looking at the threats, so you know what obstacles does your company potentially face? What do your competitors up to? What threats do they are potentially posed for you? Technology innovation Again? What threats to your weaknesses, which have identified early Ron put you at risk off. And then, of course, you know what's going on in society. So that is a recently quick overview of the SWAT analysis. It's very easy to remember because of the S W O T. Once you've got the grid in your mind, you'll never forget it. But you need to be using it pretty well every day. If you're doing any sort of strategic planning or business planning 23. Introduction to Michael Porter’s Competitive Five Forces: I want to introduce you to Michael Porter's Five Forces model again, this is a really important and fundamental business model, which is in regular and constant use in business strategy, so you need to be aware of it. We'll look at it in more detail further on, but this whole purpose of this lecture is toe maybe get used to be familiar with, basically what Michael Porter is proposing here. The model is an analysis off competitiveness in an industry, and it's basically looking at the five forces that affect a company on a permanent basis so that the firm can understand the forces at play on, therefore, design, their strategy to take these into account. The five forces, basically are the intensity of rivalry or competition amongst competitors within the industry, the threat of potential new entrance. So people coming in, new competitors coming in and joining in that rivalry, the bargaining power of buyers. So this is the ability of customers to either force you to reduce your prices against the threat of going somewhere else and then the about bargaining power off suppliers, which is basically the ability off your supplies to increase their prices against you to make your supply costs. Your raw material costs a lot greater on. Then there's the threat of substitute goods and or services. So this is where there's another way off doing what you do on. Therefore, you would lose sales and market share accordingly. This is essentially what the model looks like, where you have the company in the medal, so you have the competitive rivalry on the left. You have the power of suppliers and on the right, the power of customers and then the bottom threat of substitute products and then the threat of new entrance. So those are the five forces on the company is in the middle, jiggling those and having to deal with them. Let's take a look at these one by one, then, the first of which is competitive rivalry. And this is really looking at the number on the strength of the competitors in the industry . How do their products and services compare with yours and we talk a lot or we will talk a lot about competitive advantage on you gotta weigh this up and see how competitive you are against your competition. If the competitive rivalry is high, then you tend to get aggressive pricing on this obviously impacts and lowers profits if the there is ready to be low competitive ivory I you're in a strong market position. You can obviously have a lot more control over your prices and therefore your profits with supplier power. We're really asking the question. How easy is it for your supplies to increase their prices against you? And if you have lots of suppliers, then they have relatively low power, and it's not easy for them to do that. But if you're dependent on a few suppliers, then you're potentially at risk off them, deciding that they want to make more money from you. And they have high power with customer power. We're really looking at how your customers might be able to force you to lower your prices , and they all can obviously do this by threatening to switch to other products. If you're ready to be dependent on them, I you've got few customers. You've got high customer concentration, then they have high power. Now one of the issues is you might have 100 customers, but if you have one customer who is responsible for 50% of your sales. It doesn't matter how many customers you've got behind them, that one customer will have very high support but have high, very high power over you. And that's why it is not just question. The number of customers is custom the concentration of your sales to individual customers as well. And if you have lots of customers and low customer concentration, so there's no single customer who's got more than, say, 1% of your sales. Then they have low power, and you are in a relatively stable and strong position. The threat of substitution is asking how your customers confined different ways to solve the problem that you sold for them. Things like outsourcing, maybe manual processing if you're offering them some sort of water mating process. But it's not a question of them going to another competitor is them finding another way to do what you're doing for them? And finally, the threat of new entry? Can other new firms enter the market? Are there barriers to stop them doing this? Now these might be cost intellectual property rights. I PR technology branding, customer party switching goes whatever it is. How easy is it for new companies to come in and start competing against you. Now I've produced the diagram again, and I put some more notes this time against the the different forces, which hopefully you'll find useful as an aide memoire when reviewing this and including it in your strategic planning, because you really must do this. This is such a fundamental model you need to understand the level of competitive forces and within the industry that you operate on. These are the five forces to concentrate on. So definitely look at the PdF, which will be downloadable from the resources section on. You'll need to make your own notes against your own business. So that's my introduction to Michael Porter's Five Forces model. There will be more about Michael forces model later on in the course. But for the time being, this is just to make you familiar with the five forces what the models helping you to do so that you can bring into your strategic thinking very early on 24. Lafley and Martin 5 Step Strategy Model: welcome to another business strategy. Transformation video. Today I Want to talk to You about lastly and Martin's five step strategy model in 2000 and 13. So it's relatively recent. Lastly, and Martin published their five Stead Stratus, a five step strategy model in their book Playing to Win. Now, the five questions they set out help you to clarify your company's strategy so that you can position yourself in the best possible way in your market. Now the five questions are on. We're going to go through these in detail winning aspiration. So what is our winning aspiration? Where will we play? So that's all about the selection of customers and markets. How will we win? Which is about trying to define your USP on your differentiating strategy so that you can compete successfully against your competition the capabilities needed, which is all about execution? How do we execute on this strategy that we've identified on then management systems required? Because if you can't, actually, if you don't have the resources inside your organization to deliver this strategy, then obviously it's not gonna be successful. So we're gonna go through these in a little bit more detail. One at a time on. The first question we're going to look at is what is our winning aspiration. It is asking you to focus on the goal of your business. Where do you want to be in five years time? You need to address this objectively, but at the same time bring your vision and ambition to formulating or goal. You should be able to explain this very succinctly to your audience, whether they are employees, shareholders or customers. Be realistic, but aim high by clearly thinking through this goal, you are going to force yourself to be constrained and directed by it in the future. Sections off this model Where will we play? This question is asking you to define and identify the markets you want to operate in onto the potential customers you want to sell to. You will need to decide whether you are going to be selling direct your customers or whether you need to develop channels to your target market through intermediaries. How will we win? What strategies are you going to develop to ensure that your product and service is differentiated from your competition? Every business has competitors on when you understand how they operate and differentiate. Then you can devise more effective competitive strategies. Toe outsell them. And no, that is not easy. Just remember the problem you are solving and what your customers want. Devise your strategies to deliver that whether you differentiate on price or quality or customer service, find a way to make your customers want to buy from you and not your competitors. You can use SWAT analysis to help you understand the strengths and weaknesses of your business and to evaluate your opportunities on the threats facing you. What capabilities must we have in place? Toe win? Now you are being asked to look at execution. This will require skills, staff and infrastructure to ensure that you can compete successfully in your chosen markets on provide your products and services to our target customers. Without these, you cannot achieve your goal. What management systems are required to support our choices? You will need the right skills in your management team to implement your strategic choices . This means everything from finance to HR, procurement to sales and marketing and, of course, CEO leadership skills. If you follow this sequence and use it as a template for debate, you will be able to use this framework to develop your strategic positioning on competitive U. S P model summary. Martine emphasizes that in order to use the framework effectively, you need to evaluate your strategic choices simultaneously on Do Not sequentially. Each step loops back to the one before it so that your discussion continually evolves. This helps to prevent you going down on uncompetitive, colder sack or getting stuck at the How will we win stage In particular, you need to make sure that you consider where to play in conjunction with How will we win If you cannot work out a winning strategy in your chosen market, you have chosen the wrong market and need to reevaluate where to play. Can you identify what Martyn calls matched pairs off where and how which you can then compare against each other? Andi, against your winning aspiration. There you have it. Laugh. Lee and Martin's five step strategy model. If you found that interesting, that's terrific. Subscribe to my channels. Where have you happen to be watching this? If you've got any questions about this or anything else to do with business strategy and transformation or entrepreneurship, then reach out to me, John J. B d Cali dot com on. I'd love to be able to help you. Thank you for watching this video on. I look forward to seeing you again very soon in another one off my business videos. 25. 5C Analysis: I'd like to talk to you now about five c analysis. This is a framework which I think is particularly helpful. It enables you to look at the environment around a firm. It does dip into a couple of other models as well, but it gives quite a broad and rounded picture of what's going on the five C's, our company collaborators, customers, competitors and context on. We're gonna take a look at each one of these just to give you a little bit more in depth understanding of what these relate to the company's. Where we start is asking the simple question. What is the sustainable competitive advantage now? We look at competitive advantage a lot through this course and is one of the key defining factors that a company needs to establish. We talk about it in the customer value proposition. We talk about unique selling points. It's important to the business plan. Now. The sustainable advantage may be built on a number of different things. It could be on brand equity. Could be economies of scale. It could be the technology. It could be a combination that war three or other factors, but that is the key question. You're trying to get to the bottom off. What is the sustainable and the word sustainable here is very important. What is the sustainable competitive advantage? When we look at collaborators? We are essentially focusing upstream, not downstream. So we're looking on the supply side off Porter's five forces if you like. And collaborators are people or firms who facilitate or improve a company's products or services so very much on the supply side. And if you look at the supply chain off a business on where it comes from, then supplies aren't just providing products and services. They can be improving what the company is doing as well on adding some value. But say this model only looks upstream because the downstream collaborators our client classified under the five C analysis as customers, which brings us neatly onto customers. Now these could be some segmented in three major ways, and then you can go a bit deeper. The segmentation czar, the total available market, the serviceable available market on the target market. I'm gonna give you three detailed definitions of those in a minute, but once you get those three in place, then you can sub segment by demographics, geography and other things. So you're trying to segment the market for the business's customers to make sure that they really understand who they're targeting. So if we look at the three main models in this regard, the TAM, the total addressable market, this is the broadest segment of off the market, where the customers are demanding a particular product. So it's it is the whole market for that product or service. You then come down one and you're looking at the serviceable available market. The Sam, which is a subset off the tam on this is the potential users off the company's products or services. So it's it's a subgroup of town and then below that you have the serviceable obtainable market, the some, which is the narrowest definition. I'm here. We're looking at the the segment of the market, which the company really sticking, expects it can capture for its products or services on. Then you can start to sub segment below that when we look at competitors were looking at the other companies operating in the same industry. Now the standard way of getting an idea of who the competitors are is to look at our standard interest industry definitions. There's one in North America, the North American industry classification System. You've also got S I C codes, dyin codes, things like that. But basically you're trying to identify who the main competitors are within that, the one of the major factors you want to understand because this effects all sorts of the competitive dynamics within the industry is what is the market concentration. And to do that, you use what is called the concentration ratio metric CR four. And it's basically the percentage of market share held by the top four firms on this concentration ratio helps you to understand some of the competitive dynamics because if there's a very high amount off the market controlled by four firms, then it's going to be a very tough market to compete in if you're a small player. If the market, however, has got a very small percentage, then it's gonna be a very fragmented market, open to consolidation, open to some real innovation and growth, and therefore potentially offering much more opportunity. Context really relies on the Peston model, which we're going to look at in this section, but these are areas which over which the company may have limited or no control on it effects they effect, although not necessarily equally all the companies in the industry. So, really, you're looking at the macro economic, um, surroundings off the business and trying to understand how they're going. Teoh impact the business now the obviously example, and I'm recording this in April 2020 is the Corona virus, which is a macroeconomic phenomena which has impacted the globe and everybody. Nobody saw it coming, but every company pretty well has been affected by it, and you, therefore, can look at it as a macro economic external factor on. Then you can start to look and see how companies have bean individually affected by something of that nature. So that is the five c analysis. Its context, how it's set up, how it works. It's a very useful tool for looking at a company and getting a broad understanding off where it's positioned in its market before you dive particularly deeply into one or another in particular area where it's the customers or the supply chain aware of it happens to be but a useful framework in one you should definitely have in your toolbox 26. What is PEST or Broad Factors Analysis?: I want to take a high level look now at what pest or broad factors? Analysis means. This is by way of an introduction so you can get your mind around this particular tool. This particular framework, pest analysis or broad factors, now says, is an essential component off external analysis, and it focuses in on the four macro economic factors. These are political, economic, socio democratic on grant own woodcraft pick and technological pest BST. Let me give you an example, because these are factors which impact the operating environment off a particular business . And if we look at an example, I can use these factors, too, if you like, illustrate how this works on the obvious one to use at the moment. I'm recording this in March 2020 is, of course, the Corona virus pandemic. And if we start with the political impact, you can see that our business operating in this environment where the pandemic is prevalent , growing and creating more and more disruption. So what's the political impact? Well, the political impact is global. You've got governments all over the world responding or not responding. You've got a very authoritarian approach in China. You've got a somewhat more locked down approach coming out of Italy and Spain. You've got a more scientific led approach in the UK The American approach does seem to be slightly all over the place. But forgive me for making the obvious observation. It is difficult really to believe that if you're operating a business in this environment than these political decisions are not going to have an impact. So you need to ask yourself So if the government is saying I have to do this already has to do that What is it going to do to my business? So you are assessing the political impact with this particular issue in mind, the economic ramifications are, of course, quite severe. It's widely predicted there's going to be a global slowdown, probably a global recession. The U is certainly going to go into recession if it's not already there in the UK were slightly more robust economically, but on the less with people basically not going to sporting events, not going to cultural events, avoiding the shops and not buying anything, staying out of things in public. It's really only the pharmacies on the food shops which are really getting very much attention. And, of course, the home delivery services are almost overwhelmed. So if you're operating a business in whatever sector happens to be, you know clearly you can expect there to be a reduction in demand for your business and probably some significant disruption to your supply chain. So you need to take all that into consideration when it comes to so seo Democratic repercussions Will. People aren't going out. People are not going to these big events. People are in a behaving in a completely different way. If you're running a pub, you can expect fewer people to come and see you. So you again, you have to weigh up how people are going to behave under this particular factor and how it's going to affect your business. And finally technological Well, what can you do about it? Is there a technology solution? If you've got a group of employees and you don't want them to have to take risks by coming into the city, then is there a technological solution to them? Working from home? I am very fortunate. I do most of my work from home, and in fact I had a meeting scheduled for next week, and we've now agreed The participants and I have agreed that we're gonna do that meeting, you know, over the online system. So we're not actually gonna have to leave our homes. We're not gonna have that meeting. So using technology to help our business to carry on and keep developing. So these thes tools, this framework, this pest framework is helpful for saying, OK, well, here's the problem. Here is my business. And how am I going to step my way through these four macroeconomic factors and assess its impact on my business? So I'm effectively evaluating the risks and opportunities in the market for my business. And of course, these four factors are effectively a deeper dive, a more focused dive because we're giving you some specific areas to look at into the SWAT analysis, which is the, you know, the opportunities and the threats, which is the external factors off the SWAT analysis. But you're looking at it through a different lens, and this is where it helps to use these different tours in different ways because you can then have a different perspective and ask different questions and get different insights by working your way through this portfolio off models and frameworks. So that is what the pest or broad factors analysis is, and that is, hopefully with that example, you get an understanding of why you want to use it. 27. PESTEL Analysis: Let's take a look now at the pest. Tell analysis. This is a strategic framework to evaluate the external environment of the firm, the pest l stands for political, economic, social, technological, environmental and legal. Now it won't have escaped your attention. I'm sure that it's an extension off. The pest analysis, which basically has added on Embera mental and legal to the core of the pest analysis framework, which we've already looked at, is particularly useful. If you want to look at the pros and cons of a business strategy, you can put these down and then have a pros and cons column on opening up to discussion on that can provides some very interesting comments and thoughts, and it gives you the framework. Teoh harness that discussion so that you can consider all the factors in a company's environment. Of course, you can also use it and bring it in tow. Other models, particularly the SWAT analysis When you're looking at the opportunities and threats, they tend to be the external factors, and you can apply pest, alto those and, of course, in Porter's Five Forces models. When you're looking at some of the external competitive circumstances, let's take a look at the each of these one by one, just quickly. You're familiar with pest, I'm sure because we've just covered it. But let's just go through them anyway, so that you've got them to take off your list. So political is essentially the macro economic, the macro factors which are brought into play with government policy and the government's action. So it's things like tax policy, trade restrictions, tariffs and bureaucracy. And I'm sure wherever you are, there's plenty of the latter. In economic terms, we're looking at how the economy itself, my impact of business. Now, this is April 2020. I'm right in the middle of a Corona virus, so there's a huge amount going on economically to impact the business. But we're looking in the model at things like growth rates, interest rates, exchange rates, inflation on unemployment rates. All of which, of course, are off the scale one way or another just of the moment. But these are also considered broadly in the external or any external environmental analysis of the firm, so that's quite a useful checklist. To have a look at socially we're looking at is cultural and demographic factors, which can it particularly impact consumer behavior, which then impacts the firm? So it's things like cultural aspects and perceptions. Health consciousness, population growth rates, age distribution Could career attitudes, I said, I'm sure that this speaks for itself. Technological factors These air really linked to innovation within an industry. So we're looking at R and D activity automation. Technological incentives on the rate of change in technology as well is very important. Environmental factors really examine how ecological factors impact affirm things like weather conditions, temperature, climate change, pollution, natural disasters. But particularly in the last 10 20 years, the whole issue off since corporate sustainable responsibility, where companies are operating in a ecologically and environmentally sustainable way, is very important. It comes under the heading of C. S. Our corporate sustainability responsibility on this is another significant factor that can affect firms. Legal factors really focus on legislation and regulation which control or limit what a firm conduce. So things like industry regulation licenses and permits labor laws intellectual property. Now the pistol analysis can be an excellent framework on its own. But if you're putting together something like a discounted cash flow analysis in a financial model, then you need to have some basis for evaluating your assumptions. Going forward on the pest l framework and the list of factors we've just discussed can be really helpful in doing that. You can also use it, say, in an M and a process where you've got a list of companies to screen. And if you put them the companies across the top and you put the list of factors down on, then you work your way through each company seeing pros and cons for each company against all the factors. Then you'll end up with a very detailed on evaluative list, which you can then use in your screening process. You could even score them, maybe 1 to 10 on, then see what scores come out at the end of it. So again, it's a framework which can be adapted in a number of different ways to help you with your business strategy in your business planning. So that's the pest. Tell analysis. I se and ZN extension off the pest analysis. But all these frameworks are really great tools, which once you've got the idea off, how they work on what's inside them can really help you with the business planning and the strategy that you're putting together 28. Ansoff Matrix: I want to introduce you now to the answer off matrix. This is also called the product market expansion grid, and it helps you to analyze and plan strategies for growth. It basically shows how a firm can grow. Andi the risk associate ID with each strategy. It's a really good little model. It was originated by a gentleman by the name of H. Igor and Sof. Hence, and Soft Matrix on it was first announced to the world when he published in the Harvard Business Review back in 1957. So it has really stood the test of time. This is what the model looks like. You basically have four strategies. I'm going to go through them in in some detail, but just to get used to the grid. And you have existing products and new products, and you look at market penetration and market development. And then on the other side, you've got product development and product diversification, and the further you get from left to right and from top to down, the higher the risk. So let me talk you through these and you'll understand what I mean. Market penetration is basically increasing the sales of existing products in an existing market. Product development is where you introduce new products, but you still do it in an existing market. Market development is where you enter a new market, but with existing products, so you can see in the 1st 1 you've got existing products existing market in the 2nd 1 you want new products, but existing market. In the 3rd 1 you've got a new market, but existing products and then the last one Diversification is where you enter a new market with new products. So it's not surprising that off the four strategies, market penetration is the least risky and diversification is the most risky. So let's take a look at market penetration first. The goal here is to increase market share on the strategies include reducing prices to attract new or existing customers, increasing promotion and distribution efforts. So you're bringing more umph behind, trying to sell more product or through acquisition these the annex the acquisition of existing competitors. So you're taking bringing in an existing competitors, eggs Comparable product said, which is an act of market consolidation. So it's the same product competitive You, Adam do together, and you basically penetrate the market because you increase market share by acquisition. Product development is where you're developing a new product but still catering to the existing market. So you're putting a lot of effort into R and D and the expansion of your product range. But you'll do it best, and its most successful, when you have an event in can devise innovative solutions to meet your existing markets needs. Now the best example I can think of it is Apple who started off with the obviously with the computer, and then they had the I palled, and then they had the iPhone on. And then they have the iPad, and then it's the buds. So each time, their innovating with new products essentially to their existing market, so their product development has grown their sales. Andi yes, their market shares increased in. The new customers have come in as well, but primarily they're selling more products incrementally to their existing client base. I know this because I'm sitting on a desk full of apple products in front of me. Product development strategies include investing in R and D to develop new products, acquiring competitors product and then merging the resources to create a better product. So two plus two equals five strategic partnerships with other firms to access their distribution channels or brands. Market development is where a fermenters in Newmarket with their existing product, so they're going off. The new geography is new regions. New segments Don't just think geographically think about market segments here. It's most likely to succeed when the firm owns proprietary technology that it can leverage in new markets. It make gives it a competitive advantage, a unique selling point to take into that new market where consumers in the Newmarket have disposable income. So you obviously want to go into a market where there's a lot of disposable income on lots of demand and so people can afford to buy your products and then where consumer behavior in the new market does not deviate too much, too far from the existing market. So you want a fairly similar type of market. It's a bit like going perhaps going from the UK to the US, as opposed to going from the UK to I don't know, perhaps it may be India or Asia or, you know, Russia different, completely different market characteristics. Strategies debate this successful include identifying a new and selling to a new customer segment, moving into a new domestic or regional market or going into a new country. A new international market Diversification. The most difficult is when you're bringing a new market Onda new product on this, actually, therefore obviously what to new axes here that cross over the highest risk strategy on there two times two Diversification related and unrelated related is when you have synergies between your existing business on the new product or market on unrelated is when you have no synergy, so that's even more difficult. You have no potential synergies whatsoever, so that is a quick overview. Off the ants off matrix. If you focus on the image off the mayor of the grid, the Matrix itself, it becomes very self explanatory. This slide deck will be available to download in the resources section so you can get it from there. But it's a super matrix for understanding growth strategies and also understanding the risks. Associate it with those growth strategies 29. Value Chain: I want to introduce you now to another one of Michael Porter's great generic models, which is the value chain. He devised this in the 19 eighties. I learned about it in the early 19 nineties when I was doing my MBA CASS Business School. Andi. It's very straightforward, but it's absolutely brilliant. And basically, although it's derives from the 19 eighties, it's still every bit as valuable today as it was then. Basically, it focuses on the internal activities of the business, and it helps you to understand the cost structure and how different activities in the business and value. What we're looking at is how all the different activities basically add up to contribute to the firm's margin on That means it's profitability, and this is what the model looks like. At the bottom. You have the primary activities inbound logistics operations, outbound logistics, marketing and sales and then service and then the support activities, firm infrastructure, human resources, technology, development of procurement on these all result in margin. So that's the basic framework on the model. Let's go into it in a bit more detail. The primary functions, then the first of these is the inbound logistics which is all about the receiving. Storing it is distribution of raw materials, and in this area, supplier relationships are key, and anything you can do to improve your inbound logistics obviously can add to your margin . Then we look at the operations, and this is all the activities that transform the inputs or materials into products and services. So you're looking at basically allow the nitty gritty of the inference of manufacturing business, all the manufacturing off operations. It's a services businesses. Then it's everything that people within the organization of doing to deliver that service on. There's huge opportunity here to look at it critically and to find where you can make changes that will add value and contribute more to margin. Then you look at the outbound logistics, which is the delivery and distribution to customers. This is where your channel partners and your distribution partners are absolutely critical on. There are obviously opportunities to improve your distribution, and channel strategies on this can lead to improved margin. Marketing and sales is all about obviously delivering the knowledge that on making people aware about the benefits of your products and services, so it's campaigns online and offline and it's all about making your prospects aware that you have these brilliant products and services that are available. The investment you make in your sales and marketing not only in your people but also in your campaign and your advertising needs to be continually reviewed and measured for R. A Y. And this is where you basically sinking quite a lot of costs, and you need to make sure you're getting value from it. Then we move on to service, which is all about after sales service on what you're doing. Here is your building your customer satisfaction in your customer loyalty, which is critical to the ongoing growth off the business. If you have feedback programs and surveys, they can be used to identify negatives as well as positives, and anything that you learn in this area must be fed back into the business. If it's gonna have any value at all, then you turn your attention to the secondary activities. The firm infrastructure, human resources, the technology development and procurement, and these all contribute to the five primary activities. Now the whole point is that you're trying to break down all the activities and affirm that create value, giving you the opportunity to identify the key steps and opportunities for improvement so that you can improve the efficiency of the business and you can improve the margin that the firm makes on sales. And that's the critical factor here. The whole idea is to improve your profitability by being more efficient and doing things more creatively and more value, adding. But of course, you mustn't lose your focus on bringing greater value to the customer, because that is ultimately the critical goal of the business. Now I'm going to look at the Value chain later on in the course, but it's important that you're familiar with the framework on that. You understand the basic tenets of it on. We can get into in more detail later on in the course. 30. Business Model Synthesis: I've called this lecture business model synthesis because I want to try something with you and hopefully you'll find it a useful exercise. What I want to do is to step by step, combined the various models we've been discussing Andi to show you how to a certain extent they can fit together and compliment each other. So what I've done is I'm taking each model as we find it. I'll just refresh your memory about the model, and then I'm going to show you step by step, how you can layer them and integrate them to really add complexity to your strategic analysis. So if we start with the SWAT analysis, which is perhaps the simplest model where essentially strengths, weaknesses, opportunities, threats so that swat on essentially the strengths and weaknesses on the left are internal on. The opportunities and threats on the right are external and obviously in the middle you have the company, so that's very useful, and it's a great starting point. But then we can start to think about Porter's Five Forces model for understanding competitive forces in an industry. So we have the five forces here on the same grid as the Swat analysis. But on the left you have the power of suppliers and on the right you have power of customers, which in both Arenal these forces are external. But at the top you have the threat of new entrance to the industry and the bottom, the threat of substitute products. And in the middle, you have competitive rivalry. Now what I've done is I've then looked to combine these with the original SWAT analysis, but I haven't rearranged the placement of the labels to reflect the SWAT analysis matrix, so you can see these are largely external factors. So we've got the power of customers and suppliers now on the right and the threat of new entrances, substitutes of the bottom. But these Airil threats on the competitive rivalry sort stays in the middle because I think it also reflects the strengths, weaknesses and opportunities that business has. So I think you need to keep that there. But the other four factors are essentially evaluating threats to the company, which is why I've put them there. Next we move on to the Laugh Lee and Martine five step strategy model, and this is all focused about helping a company develop a competitive strategy. Now I've placed these originally between strengths and opportunities, but let's have a look at the model. If you recall, the five questions are, devise your winning aspiration. Decide where you're going to play was which market you're gonna be in. How will we win? What score your strategy going to be? What's your unique competitive advantage? What capabilities do we need to execute the strategy? And then what management systems do we need to make sure we can follow through and make it happen? So I've taken this model, and, as you see, I've put it at the top here. So it is crossing strengths and opportunities. But it does help you to think about the approach, taking your strengths and then converting it into an opportunity, which is to be competitive in the market. I moved now onto the five C's Model, which examines the environment in which companies operate again. This one is primarily external and switch to the model on the next slide, and then we'll combine it in our synthesis model. After that, here's the model. You'll recall that the five factors are company collaborators, customers, competitive competitors and climate, and if we bring this into the model the synthesis model, then we can see it's here, so it really external. And it's balancing between opportunities and threats, but it gives you MAWR Factors and mawr complexity to examine your SWAT. Analysis with the pest Bottle also reviews external criteria, and it's extended by the pest Tell Model, which adds E and L for environmental and legal. So let's have a look at these two. And then when I'm going to brew is bring in pest l two offenses said the pest model is political, economic, technological and social. And then the pest l model extending that adds environmental and legal. So if we bring it into our synthesis model, I placed it external and on the threat side, mostly because I want to keep the opportunities gap at the top free for the next model. But essentially, we're looking at the environment off the company and how it is of affecting the organization of the business. So it's not really providing any opportunities. It's mostly creating restrictions and limitations on the businesses. You why I put it at the bottom. The and soft matrix helps to devise growth strategies and understand their potential risk again, they'll have look at the model and then I'm going to include it with the others. So here's the and soft matrix. You'll remember that we look at existing products and new products and for existing products. We're looking at market penetration, which is basically grain market share, or market development, which is opening up new markets but with existing products. With the new products, we can talk about product development where we sell the new products to our existing market or diversification, where we're taking new products into a new market and you can see the risk arrows according me. So this is all about strategic growth opportunities, which is why I've put it up here and you can see how it will now comes together. To a certain extent. A lot of these models, so far as you can see, are predominantly external. But we're adding depth and complexity to our analysis, overlaying what was originally just a SWAT analysis. So most of the models have bean external, so now I want to bring one that's going to re balance that a little bit, and that's the Value chain model, which is much more internally focused. So here's the Inter the Value Chain model. If you remember it at the top, we have the support activities, the firm infrastructure, human resources, technology, technology, development of procurement and then the primary activities of business, inbound logistics operations and outbound logistics, then markets and marketing and sales and then service. And these all help us to develop margin. So that's the model. I'm sure you remember it from our lecture. And if we put it on the left hand side about since with synthesis model, you can see that it's now really looking at the strengths and weaknesses of the business internally in helping us to optimize those. So we end up with a quite interesting, reasonably complex on certainly, from an MBA perspective, quite challenging model. It would take you quite a long time, I think, to work through these models and write them up for your business. But nonetheless, you can see how these all come together and how they can be used in combination very effectively. So to summarize, the synthesis model shows you how you combine different business frameworks to add depth and complexity to your strategic analysis. Each model can be used on its own. But the real strength of these frameworks is layering them, as we have here. Diamond die grammatically in order to give you that complex on sophisticated strategic analysis of your business. This is a slightly artificial exercise. I'm trying to use the diagrams to demonstrate how these bottles can be used in combination . The the construct of my synthesis model is perhaps slightly artificial and possibly slightly simplistic. But in terms of communicating the point, which is, you need to use these models in combination with each other. To get the most out of them, I hope you'll find it useful exercise. 31. Black Swan Events Coronavirus: in a course on strategic planning and business planning. It will be hugely remiss of me not to bring your attention to a phenomenon which is all too obvious as I sit recording this, which are black swan events. And, of course, I'm referring to the Corona virus pandemic of 2020 on its April 2020 is I'm recording there somewhere, sitting right in the middle of it on all locks down that the term black Swan event actually is a financial term, which has been around in the financial markets for a while. But Nicholas Taleb in 2001 wrote a book called Fooled by Randomness. Where he discussed this whole phenomena on Basically, a black swan event is an extremely negative event that's almost impossible to predict now, of course, for every negative event, there's an upside. So when you got all these awful things going on, there's always somebody who's gonna benefit from it. Sadly, of course, the Corona virus pandemic is the one we're living through at the moment, but I can talk to you about some other examples. The key essence of a black swan event is that it's unpredictable that it has severe widespread consequences. And interestingly, after the event, people tend to rationalise that the event was predictable even though they failed to predict it. And this is called hindsight buyers. Now, if I give you a few examples off a black swan event, you'll understand what I'm talking about. The going back to 1997 and I remember being in the financial markets when, when this happened, the Asian financial crisis of 1997 when basically the Asian economies, which were growing very quickly, were over indebted, there was a huge collapsing confidence. Basically, with the collapse of their economies, they were in real trouble because, in essence, they had a lot of dollar denominated debt and their currencies were suddenly worth an awful lot less. I know a specific example of this because I was working in the building materials and construction sector in emanate globally, and we took a deal to a German cement company on we basically I sat down with the finance director there, and I basically said, done, this is a map of the Asian cement industry. Which one do you want to buy? Because they were pretty well all bust only because they had the wrong balance sheet structures. The businesses were still doing fine locally and they were selling their cement locally, but they were obtaining a lot of their raw materials to some extent locally. But they had financed their whole operations in dollars and therefore they couldn't repay their borrowings. In fact, we went and bought a company in Indonesia. It took us a couple years to do it. It was a $300 million deal. But it just goes to show where there's a downside. There's an opportunity you will be familiar with the dot com crash of 2000 the 9 11 attacks in September 2001 the 2008 global financial crisis is recent enough to be in living memory . And of course, as far as the UK is concerned, the whole Brexit phenomena where everybody assumed that the referendum was going to be a shoo in for the government but that the British people would vote to stay in the EU on albeit by relatively small majority that did not happen on DSO Brexit is has actually now happened. We're in the transition period on and of course in today, 2020 We're talking about the Corona virus pandemic, and people have been warning that there could be a pandemic for a long time. But if it was so predictable, why weren't countries internationally better prepared on? Why has it caught everybody so flat footed? And I'm sure there'll be a lot of hindsight bias coming out on that afterwards. But you need to think about this in your strategic planning. You need to try to identify the real risks that you face from some unpredictable event. You know, if your sales disappear tomorrow, do you have enough balance sheet resources to keep going for a period of time? I mean, this is the question a lot of businesses globally are asking themselves today. And if you look at something like the airline industry, they lease all their aircraft. Those payments have to keep going out and their revenues have gone to zero. So how do they? How do they manage that scenario? Black Swan events are something which are endlessly debated there, very interesting to read about, but they're no fun if you're living in the middle of one, so be aware that they exist. Definitely. Go and read. Nicholas Talibs book, if you like. Fooled by randomness. But it's a an element that of your planning. You were your strategic planning that you do need to factor in, particularly with the benefit off. Hindsight on Daza say we're sitting in the middle of the coronavirus pandemic right of the minute on that this black swan event is killing people all over the world, literally on its killing businesses as well. 32. Part 1 Wrap Up - Coming Up Next in Part 2: I hope you enjoyed part one off my business strategy to business plan course. We've been looking at fundamental strategy and analysis, and I want to just quickly recap that on, then perhaps touch base with you to show you what's coming up next. So I really hope you enjoyed part one of the course. I know it's gonna be a long course, but I'm sure you're going to find it really stimulating and really informative. So in this part one we've looked at business fundamentals. We connected business strategy to the business plan. We've also looked at the value off strategic analysis, so understanding the main frameworks for strategic analysis and you've had a go at a swatter. Nass's. We've also looked at a whole Siri's off frameworks and theories business models, which he used by business strategist to help them get better understandings off the business. That's his business, is they're looking at eso. We've gone through a whole series of business models on I hope you found those useful and you know what a toolbox off great business models you can start to use. So in part two, we're going to move on, and we're going to look at a couple things. First of all, we're going to take a critical look at leadership. Andi, I think you're going to find this interesting and challenging. And if you're leading a business, you need to think about it in your own context. But obviously, if you're taking an external perspective, then you need to think about in regard to the business that you're evaluating. We're also going to look at products, services and competitive advantage, competitive advantages, being one of the really key things in business. So we're gonna look at the products and services the firm and how to create a competitive advantage. I'm sure you're gonna find it really exciting. So enjoy the project. Enjoy the quiz on. I look forward to seeing you in part two of the course, so that is being part one fundamental strategy analysis from my business strategy to business plan course, and I'll see you in Part two