Outside-in & Inside-out Analyses Flashcards
(95 cards)
1
Q
Your “Toolkit” on Strategic Positioning: Outside-in & Inside-out
A
- External Analysis (opportunities/Threats = Industry boundaries) –> Environmental models
- Internal Analysis (Strengths/Weaknesses = Firm boundaries) –> Resource - based models
= competitive advantage (Ecosytem Mapping)
2
Q
Environmental models
A
- Porter’s Five Forces
- PESTEL
- Customer segmentation
3
Q
Resource-based models
A
- V.R.I.O
- Activity systems
- Value chain & value systems
- Dynamic capabilities
4
Q
SO Strategies
A
Use your strengths to seize market opportunities
5
Q
ST-Strategie
A
Use your strengths to mitigate risks
6
Q
WO-Strategies
A
Reduce weaknesses to take advantage of opportunities
7
Q
WT-Strategies
A
Reduce weaknesses to avoid risks
8
Q
Layers of the Outside-In Analysis: The macro environment (layer)
A
- The macro environment
- Industry (sector)
- competitors & Markets
- The organisation
9
Q
The macro environment (layer), what is the tool to analyse it?
A
PESTEL
10
Q
Industry (sector), what is the tool to analyse it?
A
Porter’s Five Forces
11
Q
Competitors & Markets, what is the tool to analyse it?
A
Customer & Market segments
12
Q
PESTEL to analyze the macro environment
A
P : Political
E : Economics
S : Social
T : Technological
E : Ecological
L : Law
13
Q
Political
A
- Role of the state and other political forces
- Political movements, interest groups, affected media
14
Q
Economics
A
- Macroeconomic factors such as exchange rates, economic cycles and different economic growth rates
15
Q
Social
A
- Changing cultures and demographic factors (e.g. an ageing society)
16
Q
Technological
A
- Factors such as the Internet, IoT, and digitalization
17
Q
Ecological
A
Green environmental issues, such as pollution, waste, and climate change
18
Q
Law
A
Legislative and regulatory restrictions or changes
19
Q
The macro-environment: Relevance of the political dimension
A
- Political exposure
- Direct state involvement
- High Political exposure /High Direct state involvement : e.g Energy utilities
- High Political exposure /Low Direct state involvement : e.g Food industry
- High Direct state involvement / Low Political exposure : e.g Canal Industry
- Low Direct state involvement / Low Political exposure : e.g Hotel Industry
20
Q
Porter’s Five Forces Framework: definition
A
The “Five Forces” model evaluates the
attractiveness of an industry on the basis of competitive forces
21
Q
What are the 2 factors that determine the profitability of a firm?
A
- The overall attractiveness of an industry
- The position of the firm within that industry
–> Guides strategic choices : positioning the company, exploiting industry change, shaping industry structure
22
Q
Porter’s Five Forces
A
- New entrants
- Buyers
- Substitutes
- Suppliers
- Competitive Rivalry
23
Q
Threat of New Entrants
A
- New players can disrupt the market by bringing new capacity and innovation.
- High entry barriers (e.g., capital, regulation) reduce this threat.
- Low barriers increase competition and reduce profit potential
24
Q
Bargaining Power of Suppliers
A
- This force looks at how much power suppliers have to drive up prices.
- Fewer suppliers or unique resources = more supplier power.
- High supplier power can squeeze industry margins.
25
Bargaining Power of Buyers
- This examines the power customers have to push prices down or demand higher quality.
- If buyers are few or buy in bulk, they have more leverage.
- Strong buyer power can force lower prices and better service
26
Threat of Substitutes
- Refers to alternative products or services that meet the same need.
- If many substitutes exist, customers can switch easily.
- High threat limits pricing power and profitability
27
Competitive Rivalry
- This is the central force.
- It refers to the intensity of competition among existing firms in the industry.
- High rivalry reduces profitability as companies may lower prices or increase marketing.
28
Challenges of using the Five-Forces model
- Determining the right industry
- Converging Industries
- Complementary organizations
29
The industry life cycle
1. Low rivalry: development
2. Low rivalry: Growth
3. Increasing rivalry: Shake out
4. Stronger buyers: Maturity
5. Extreme rivalry: Decline
30
Low rivalry: development
High differentiation
→ Innovation key
31
Low rivalry: Growth
High growth and weak buyers, but low entry barriers
→ Growth ability key
32
Increasing rivalry: Shake out
Slower growth and some exits
→ Managerial and financial strength key
33
Stronger buyers: Maturity
Low growth and standard products, but higher entry barriers
--> Market share & cost key
34
Extreme Rivalry: Decline
Typically, many exits and price competition
→ Cost and commitment key
35
The competitive landscape is changing dramatically
Digital transformation as a new dimension of competition
36
What happens in many industries?
Digital natives enter traditional industries and change the rules of the game
1. Create content and products
2. Thin layer, which sits on top of suppliers
3. Use the interface to get content and products
37
A market segment: definition
is a group of customers who have similar needs that are different from customer needs in other parts of the market
38
How to conduct a market segmentation?
1. Selection of segmentation criteria
2. Linking of criteria (2x2 or 3x3)
3. Adoption of business concepts & strategies
39
Selection of segmentation criteria
– Socio-demographic data: age, gender, income, etc.
– Behavioural data: market preferences, shopping preferences, etc.
– Psychological data: values, opinions, needs, expectations, etc.
40
Linking of criteria (2x2 or 3x3)
– Definition of relevant segments
– Not too many segments (“half a dozen")
41
Adoption of business concepts & strategies
– Segment-specific offerings
– Specialization
42
Inside-Out Analysis – A Framework & Agenda
page 50
43
Resources: “What we have”
- Physical/ tangible: Machines, buildings, raw materials, products, patents, databases, computer systems
- Financial : Balance sheet, cash flow, suppliers of funds
- Human (organizational) : Managers, employees, partners, suppliers, customers
44
Capabilities: “What we do well”
- Physical/ tangible: Ways of achieving utilization of plant, efficiency, flexibility, marketing
- Financial : Ability to raise funds and manage cash flows, debtors, creditors ..etc
- Human (organizational) : How people gain and use experience, skills, knowledge, build relationships, motivate others and innovate
45
VRIO
Value
Rare
Inimitable
Organization
46
Inimitable
- Physical uniqueness
- Path dependency
- Causal ambiguity
- Economic deterrence
47
Physical uniqueness
Resources that are physically unique and cannot be replicated
48
Path Dependency
When a resource or capability is developed through a unique series of historical steps
--> Competitors can’t go back in time to replicate the same journey.
49
Causal Ambiguity
When it is unclear which resource or combination of resources leads to a competitive advantage
--> Competitors can’t copy what they don’t fully understand.
50
Economic deterrence
When the firm has already made large scale investments that deter others from imitating due to cost or risk
--> The cost of replication is too high or risky for others
51
Value: definition
Does a resource enable a firm to exploit and environmental opportunity, and/or neutralize and environmental threat?
52
Rarity: definition
Is a resource currently controlled by only a small number of competing firms?
53
Imitability: definition
Do firms without a resource face a cost
Disadvantage in obtaining or developing it?
54
Organization: definition
Are a firm’s other policies and procedures organized to support the exploitation
of its valuable, rare, and costly-to-imitate resources?
55
Competitive disadvantage
--> it doesn't bring value
56
Competitive parity
--> bring value
--> it's not rare
57
Temporary competitive advantage
--> Value
--> Rarity
--> it's not imitability
58
Incremental competitive advantage
--> value
--> rarity
--> Imitability
--> not Organisation
59
Sustained competitive advantage
--> Value
--> Rarity
--> Imitability
--> Organization
60
Dynamic Capabilities: definition
Dynamic Capabilities are an organization’s ability to renew and recreate its resources and capabilities to meet the needs of changing environments
61
The 3 generic types of dynamic capabilities
1. Sensing
2. Seizing
3. Reconfiguring
62
Sensing: definition
Organizations must constantly scan,
search and explore opportunities
across various markets and
technologies
63
Sensing: Microfoundations
- Internal R&D
- Identify target market and changing
customer needs
-Tap into supplier & complementor
innovation and/or exogenous
science and technology
64
Seizing: definition
Once an opportunity is sensed, it must
be seized and addressed through new
products or services, processes, activities
etc..
65
Seizing: Microfoundations
- Delineating the business model
- Decision-making protocols
- Manage complements and control platforms
- Leadership, loyalty, commitment
66
Reconfiguring: definition
Seizing an opportunity may require
renewal and re-configuration of org.
capabilities and investments in
technologies, markets, manufacturing,
etc
67
Reconfiguring: Microfoundations
- Governance
- Knowledge management
- Co-specialization
- Decentralization and near decomposability
68
Dynamic capabilities at Enel
1. Sensing
2. Seizing
3. Reconfiguring
69
Sensing: dynamic capabilities
Ongoing process of identification of needs and challenges within
business lines
70
Sensing: Tools & Processes
Workshops --> I NEED Platform
71
Seizing: Dynamic Capabilities
Finding solutions for each challenge from a portfolio of tools that harnesses the potential of all employees
72
Seizing: Tools & Processes
Idea hubs (country level)
--> Innovation communities (topic level)
--> idea factory
73
Reconfiguring: definition
Reconfigure investment and scaling processes
74
Reconfiguring: Tools & Processes
Reconfigure investment process (indicators of innovations and sustainability)
--> scaling through PoCs and KPIs
75
Value Chain: definition
A value chain describes the categories of activities within and around an organization that together create products or services
76
Primary activities
Primary activities are directly concerned with the creation of a product or service
77
Support activities
Supporting activities contribute to improving the effectiveness and
Efficiency of primary activities
78
Value Chain
page 60
79
What to use the value chain for?
1. Generic description of activities
2. Analyzing the competitive position of the organization using the VRIO criteria
3. Analyzing the cost and value of activities of an organization
- Crucial value activities
- Cost versus strategic impact
- Where and how can costs be reduced?
80
Activity systems: definition
describe the way in which an organization meets the critical success factors that determine the industry and lead to success
81
A value system: definition
describes the inter-organizational connections and relationships that are necessary to create products or services.
82
value system/network: Strategic Decisions
1. Make or buy
2. Partnering
3. Governance
83
value system/network: process
--> supplier value chains --> Organization's value chains --> Channel value chains --> Customer value chains
84
World of ecosystems
- A world in which the success of a value proposition depends on creating an alignment of partners who must work together in order to transform a winning idea to a market success
- In an increasing number of contexts, the firm is no longer an independent strategic actor --> its success depends on collaboration with other firms in an ecosystem spanning multiple sectors
= The concept of ecosystem might now substitute for the industry for performing analysis
85
Market-Based value system
Final Customer: Buy separate products from independent sellers for consuming
them individually or jointly
Seller Product B --> generic complementarities --> Seller Product A --> competitive relation --> Seller Product A
= Arms length transactions
voir graph page 70
86
Hierarchy-based value system
Final Customer: Buy final product in the form assembled and sold by the
focal firm
Focal Firm Product --> Vertical supply chain relationships
Supplier Component B --> cooperativeties --> Supplier Component A --> Competitiveties --> Supplier Component A
voir graph page 70
87
An ecosystem: definition
is a set of actors with varying degrees of multilateral, non- generic complementarities that are not fully hierarchically controlled
88
Multiple actors
Contributing towards the focal firm’s value proposition
89
(Economic) complementarities
between actors: functions performed by
their offers create or enhance the user
value proposition
90
(Structural) interdependencies
between actors: Connections between
their offers for the value proposition to
materialize
91
Ecosystem-based value system
--> add the complementors
voir graph page 71
92
Strategically Managing Ecosystems – 5 Questions
1. Can you help other firms create value?
2. What role should you play?
3. How to provide access & attach complementors?
4. Can you organization adapt?
5. How many ecosystems should you manage?
93
How to draw inside-out and outside-in analyses?
SWOT Analysis
94
different approaches to organizing strategic capabilities within and across firm boundaries:
- Value chains and activity systems
- Value Systems
- Ecosystems
95
Edp’s PESTEL Analysis
P :
- Government support (O)
- Faster coal and nuclear exits (T)
E:
- Increasing electricity prices (O)
- Slow world economic growth / pandemic (T)
S:
- Digitalization (O)
E:
- Climate change (T)
L:
- EV subsidies (O)
- Gas phase-out (T)
