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Our aim
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ORGANIZATION
ENVIRONMENT
Industry
Suppliers
Customers
Competitors
Substitutes
Economy
Government
Society
Technology
Nature
Tools:
PESTEL
Porters 5 forces
Structure conduct performance
SWOT
Industry value chain
Positioning
The
University of Sydney tools
STRATEGY
Strategy
needs to fit
Resources
Capabilities
Goals
Architecture
Structure
People
Systems
Culture
Leadership
Tools:
Resource and
capabilities analysis
- VRIO
Firm Value chain
Cashflow analysis
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!#
#
+!
)(((
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Major contractors
can provide total
project solutions
Fabricators,
Construction
Contractors
(Elephants Dancing)
Very large Asian
contractors (eg.
Hyundai) can provide
total oil + gas platform
solutions
In resources, some
construction companies
(eg.Leightons) will
provide a complete
project package
(including engineering)
directly to the client.
Engineering
Service
Providers
(Few Players)
Globally, significant
mergers
Some significant players
have disappeared
through major project
disasters
Fewer, bigger global
players (Kvaerner, Flour,
Wood, Technip, Amec)
Less willingness to take
on project risk (some big
failures in the past)
Global players have not
succeeded much in
Australia / S.E. Asia projects too patchy.
Oil + Gas,
Resource
Companies
(Significant Restructuring)
Majors are merging (eg
Mobil-Exxon, BP-Amoco,
BHP-Billiton, RTZ-CRA,
etc) to form mega majors
As they increase in size,
tendency is to outsource
functions, including
engineering
Second-tier companies
pick up smaller assets and
they have limited inhouse
engineering capability
Search for new energy
solutions and use of
technology (BP)
Oil + Gas /
Resource
End Demand
(Strong Demand)
Continuing demand for
oil, gas, and resources
particularly in the region
because of China and
Asia growth
Shift towards bigger and
sometimes more difficul
projects as easy
reserves are depleted
Many significant
resources (particularly
gas) in the region
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&!" *!$$
!
!
Industry:
%
Has the structure of the industry competitors
been changing? Concentrating or
&*$
fragmenting?
Strength of Forces:
Which if the 5 are the critical forces?
Increasing intensity or decreasing? Is the
industry more rivalrous?
Future: Which of the 5 forces will be
important in the future? What is the likely level
of rivalry in the future?
& !
Bargaining power
of suppliers
Competitors:
Who have been the most successful
competitors in the industry? What strategies
are they pursuing? On what basis do they
compete? Any aggressive competitors?
Future: Who are the important competitors in
the future? On what basis are they likely to
compete? Who wont survive?
"$" "!
Industry
Competitors
Bargaining power
of buyers
Rivalry among
existing firms
&* !
&!$"&"!
and profitability:
What has been the emerging trend in
industry profitability? What has been limiting or
constraining the industry?
Future: How will the changes to structure
impact future profitability? Is the future
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industry profitability likely to be higher/lower?
Suppliers
Industry
competitors
Customers
FFinal consumers
Consider the value creating activities in the path from raw materials to final
consumer.
Where are the strengths (and therefore profits) in the chain?
Future outlook:
Is there any structural change occurring in the chain?
Do participants compete in more than one link?
What will the industry value chain look like in 3 to 5 years? And beyond?
Is the chain fragmenting or consolidating?
The University of Sydney
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&!" *&
Are their any significant
changes in the industries
that supply?
Will our suppliers be
able to command more
power over the value
chain in the future?
Will the availability of
key resources be of
increasing importance in
the future?
Industry
competitors
FFinal consumers
Potential
Entrants
Push
Suppliers
Industry
competitors
Substitutes
Pull
Customers
FFinal consumers
Growth?
Value shifts?
Major product/
market shifts?
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3 Horizons of Growth
Horizon 1
Extend & defend
current businesses
= profit growth
Horizon 2
Build new
businesses
= revenue growth
Horizon 3
Create viable
options for future
businesses
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New or Modified
Products
Existing
Products
PRODUCT
DEVELOPMENT
DIVERSIFICATION
MARKET
PENETRATION
MARKET
DEVELOPMENT
BASE
Existing Market/
Customers
The University of Sydney
New Market/
Customers
Options for Growth Model, Igor Ansoff, 1965, Corporate Strategy, McGraw-Hill New York, p.109
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Risk matrix
New or Modified
Products
Existing
Products
PRODUCT
DEVELOPMENT
DIVERSIFICATION
MARKET
PENETRATION
MARKET
DEVELOPMENT
BASE
Existing
Customers
New Market/
Customers
Source: Day (2007) Is it real? Can we win? Is it worth doing? Harvard Business Review
The University of Sydney
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Source: Day (2007) Is it real? Can we win? Is it worth doing? Harvard Business Review
The University of Sydney
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Source: Day (2007) Is it real? Can we win? Is it worth doing? Harvard Business Review
The University of Sydney
Group exercise
Refer to the Product Market Risk Matrix
(discussed in G. Days paper)
Plot each of the growth options
on the matrix. Refer to the
questions in Days paper to
help you plot the position of
each option on the matrix.
Based on the analysis what
options do you recommend
Worley pursue?
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Growth Options
1. Saudi Arabia and the Middle
East
2. Houston
3. Mining and minerals
4. General Infrastructure (e.g.,
roads, bridges, water, etc.)
5. Commercialise software
technology
6. Minor project development
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Portfolio Analysis
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Consider the firm value chain and how the business adds value across the
chain by applying the business resources and capabilities
R&D
Procurement
Production
Distribution
Advertising
Sales
Service
Pricing
Undertaking
Syndication
Placement
Trading
Site
selection
Purchasing
Staff
education
Supervision
Store
mgmt
Distribution
Advertising
Store merchandising
Manufacturing
Financial
Fast food
restaurant
Retail
Product
development
Business
Concept
planning
Product
development
Advertising
Restauranttype
development
Buying
Selling
Sales
promotion
Service
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Rare
?
Costly to
imitate
?
Exploited by
organisation
?
Competitive
implications
Firm
performance
No
No
Competitive
disadvantage
Below average
Yes
No
Yes
Competitive parity
Average
Yes
Yes
No
Yes
Temporary
competitive
advantage
Above average
Yes
Yes
Yes
Yes
Sustained
competitive
advantage
Persistently
above average
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Technology
Operations
Sales and
Marketing
Distribution
Service
Business A
The image
cannot be
The image
cannot be
The image
cannot be
The image
cannot be
The image
cannot be
The image
cannot be
The image
cannot be
The image
cannot be
Business B
Business C
Business D
The image
cannot be
Business E
Opportunity to combine purchasing activities to gain more leverage with suppliers
Opportunity to share technology, transfer technical skills, combine R&D
Opportunity to combine sales & marketing activities, use common distribution
channels, leverage use of a common brand name, and/or combine after-sale service
No sharing opportunities
The University of Sydney
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Industry
Growth
Earnings: low,
unstable, growing
Cash flow: negative
Strategy: Evaluate
Horizon: 3
Earnings: low,
unstable
Cash flow: neutral
or negative
Strategy: Divest
?
Dog
Earnings: high
and growing
Cash flow: neutral
Strategy: Invest for
growth
Horizon: 2
Earnings: high, stable
Cash flow: high, stable
Strategy: Harvest
Horizon: 1
Cash cow
Low
Low
High
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!* #" )
Protect
Protect
position
position
Medium
Build
Build
selectively
selectively
Selectively
Selectively
manage
manage
for
for
earnings
earnings
Build
Build
selectively
selectively
Harvest
Harvest
Low
High
High
The University of Sydney
Invest to
Invest
build to
build
High
Medium
Build
Build
selectively
selectively
Limited
Limited
expansion
expansion
or Harvest
or Harvest
Harvest,
Harvest,
divest
divest
Low
!* #" )
Industry attractiveness
Market growth rate
Market size
Demand variability
Industry profitability
Industry rivalry
Global opportunities
Macroenvironmental factors
Ability to compete
Market share
Growth in market share
Brand equity
Distribution channel access
Production capacity
Profit margins relative to
competitors
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(
Natural
Owner
(High)
One of
the pack
(Low)
High
Medium
Low
Measures of industry
attractiveness:
Market size
Industry growth rate
Industry profitability
Cyclicality
Barriers to entry
Threat of new entrants
Threat of substitutes
Supplier power
Buyer/customer power
Intensity of rivalry
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(
someone else.
Give top priority to business units that lie toward the far left of the
matrix - either by developing them internally if you are their natural
owner or by selling them as soon as possible if someone else is.
Consider improving a business unit and selling it to its natural owner if
you are well equipped to increase the value of the business unit through
One of
the pack
(Low)
Medium
Low
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Stand-alone attractiveness
(High, medium, or low)
Measures of industry
attractiveness:
Market size
Industry growth rate
Industry profitability
Cyclicality
Barriers to entry
Threat of new entrants
Threat of substitutes
Supplier power
Buyer/customer power
Intensity of rivalry
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Readings
Creating Corporate Advantage, Collis, D and Montgomery, C.,
Harvard Business Review, May-June 1998
Staircase to growth, Baghai, Coley & White, McKinsey Quarterly
(in Learning Resources on BlackBoard)
MACS: The Market Activate Corporate Strategy Framework,
McLeod & Stuckey, McKinsey Quarterly (in Learning Resources on
BlackBoard)
Assignment 1 is due in 2 weeks: Work on your research for your
individual presentation
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