1、 bc Stan MirandaLondonBusiness Unit Strategy Framework lIntroductionlWhat is a Strategy?lWhat is a good Strategy?lWhat are the key elements of a Strategy?lHow do we develop a good Strategy?lKey TakeawayslFrequently Asked QuestionsStrategy Development Tools Corporate Versus Business Unit StrategyBusi
2、ness Unit Strategy sets market and product priorities,defines sources of competitive advantage and allocates resources behind strategic imperatives.lDefines full potential targetslFocuses on core markets,products,customer segments,channelslDefines sources of competitive advantage and core competence
3、slPrioritises strategic imperativeslDefines potential adjacent expansion opportunitiesCorporate StrategyBusiness Unit StrategyBusiness Unit StrategyMarket StrategyProduct StrategyChannel StrategyFunctional Area StrategyProduct StrategyChannel StrategyFunctional Area StrategyMarket Strategy The Bain
4、ToolkitBusiness Definition and Business Unit Strategy are at the core of all results delivered through strategy at Bain.BusinessDefinitionBU StrategyBusiness DefinitionPerformance ImprovementM&AOrgCorporate StrategyJoint Venture/AlliancesGrowthPortfolio StrategyCore CapabilitiesO/head Cost Reduction
5、Parent Value AddedChange ManagementPost Merger IntegrationOrganisation DesignProcess RedesignRole of CentreShareholder Value AnalysisLBO Commercial ReviewsSales and MarketingVMRsLoyaltyAcquisitionEvaluation lIntroductionlWhat is a Strategy?lWhat is a good Strategy?lWhat are the key elements of a Str
6、ategy?lHow do we develop a good Strategy?lKey TakeawayslFrequently Asked QuestionsStrategy Development Tools Definition of Strategy(From Clients)“A route from A to B.”“Long term plans,unfettered by short term pressures.”Bain Definition of StrategyStrategy is a proprietary set of actions that better
7、serve customers than the competition.Bain Definition of StrategyStrategy is the science of allocating scarce resources.Importance of StrategylYou wont get there without knowing-where you are going-how to get therelGuides decision-making and resource allocationlDefines full potentiallStrategically mi
8、nded businesses generally out-perform operationally managed businesseslClearly communicates to the organisation where they are going Importance of StrategyCEOs believe a strong strategy is key.Attributes that will make a company most respected in the future 1.“Strong,well thought out strategy”2.Maxi
9、mizing customer satisfaction and loyalty 3.Business leadership 4.Quality of products/services 5.Strong and consistent performance Financial Times Worlds Most Respected Companies Survey(Nov.1998)lIntroductionlWhat is a Strategy?lWhat is a good Strategy?lWhat are the key elements of a Strategy?lHow do
10、 we develop a good Strategy?lKey TakeawayslFrequently Asked QuestionsStrategy Development Tools Strategic Principles“Perhaps my most important act was my first central idea for GE back in 1981,which was my decision to be either number one or number two in our businesses-or get out of them altogether
11、.”-Jack Welch,CEO General Electric Strategic Principles“For a new technology to really flourish,it should be managed and marketed on its own,without exploiting the synergies from other divisions.That is because when a technology is successful-executives will slow down the growth of new competing tec
12、hnologies.”-Robert GalvinCEO Motorola 1.Rooted in a few powerful guiding strategic principles2.Proprietary3.Makes trade-offs4.Defines 2-3 top strategic imperatives5.Built on strong basic operating performance(i.e.,is implementable)6.Dynamic-“future proof”What is a Good Strategy?lIntroductionlWhat is
13、 a Strategy?lWhat is a good Strategy?lWhat are the key elements of a Strategy?lHow do we develop a good Strategy?lKey TakeawayslFrequently Asked QuestionsStrategy Development Tools Iraqi War Iraq invaded Kuwait,declared Kuwait a province UN Security Council declared annexation void An alliance of Na
14、to and Middle East countries appointed General Schwartzkopf+Security Council of Allied forces Colin Powell to command the Allied Forces You are general Colin Powell You need a strategy(“lets call it Desert Storm”)August 1990January 1991What are the critical elements of Strategy?Desert StormK U W A I
15、 TI R A QS A U D I A R A B I AI R A NBaghdadNasiryahKuwait CityBasra Iraqi War-Key Elements of Strategy Remove the Iraq threat to Kuwait Not to annihilate Iraq1.Goals Not Iraq;Kuwait and Southern border of Iraq2.Battlefield Precision bombing attacks followed by sea and land attack4.Weapons1.Speed,so
16、 Saddam had no time to mobilise army2.Precision bombing attacks followed by sea&land attack5.Plan-Strategic Imperatives NATO and Middle East countries7.Allies1.Specific locations2.Sequencing of attacks3.Media visibility to gain international support6.Plan-Key tactics1.Saddam Hussein2.Kurds3.Enemy3.2
17、0m people4.100K National Guard What are the Critical Elements of Strategy?Military Context1.Goals2.Battlefields3.Enemy4.Weapons/Troops5.Plan-strategic imperatives-tactics6.Allies1.Financial targets and vision2.Product,markets&customer segments3.Competitors4.Primary source of competitive advantage 5.
18、Management,employees&money(resources)6.Management plans&programmes 7.Alliance PartnersBusiness ContextA CEO doesnt have a strategy without these critical elements.1.Vision2.Source of Competitive Advantage3.Target Competitors4.Principal Battlefields5.Strategic Imperatives6.Key InitiativesBusiness Uni
19、t Strategy PyramidA pyramid helps to translate the strategy into a day-to-day tool.1.VisionEuropesmost profitable automotive manufacturer by 2002:5%ROS&7%growthAutoCo Pyramid (1)AutoCo Pyramid (2)Low cost producer of high quality vehiclesDistribution network which delivers high owner loyaltyCustomer
20、-driven PD Process2.Source of Competitive Advantage 3.Target CompetitorsPremium ManufacturersVW GroupOther Mainstream ManufacturersAutoCo Pyramid (3)4.Principal BattlefieldsDrive core C and C/D platforms everywhereDominate UK and MCV across EuropeDrive to No.2 in GermanyAutoCo Pyramid (4)5.Strategic
21、 ImperativesAchieve lowest total enterprise costOptimise full portfolio of brands and increase premium participationExpand into profitable adjacent revenue areasAutoCo Pyramid (5)Materials costsDemand-to-deliveryCapital expenditureCapacity&labour strategyPortfolio&brand strategy Product development
22、processPremium strategyDistribution strategyAdjacent businesses6.Key InitiativesAutoCo Pyramid (6)lIntroductionlWhat is a Strategy?lWhat is a good Strategy?lWhat are the key elements of a Strategy?lHow do we develop a good Strategy?lKey TakeawayslFrequently Asked QuestionsStrategy Development Tools
23、How Do We Develop B.U.Strategies?Process StepStrategy DiagnosticImplementation DiagnosticChange ProgrammeOutputStrategic PlanImplementation Plan(s)Change ProcessResultsWhere in strategy development process are we?1.Business Definition2.Key Value Drivers3.Strategic Principles4.Strategic OptionsFour C
24、ore Steps Strategy FrameworkPurch.Tech.,R&DMfg.Mktg.SalesDistCust.Svc.3.Strategic Principles4.Strategic OptionsOption AOption BOption C1.Business DefinitionTech.,R&DMfg.Mktg.SalesDistCust.Svc.Purch.2.Key Value Drivers Business Unit Strategy1.What are the markets competitive boundaries?lActivities cu
25、rrently performedlCurrent and future business definition products/services?global,regional,local?which value chain elements?technology?InputslBusiness definition lIssues raisedOutputs Business Unit StrategylCustomer needs customer segmentation what is important?how differentiable?lCost analysis larg
26、est manageable components cost sharing capital requirementslCore capabilitieslIndustry“key value drivers”strategicoperationalWhat are the key value drivers for any competitor?Purch.Mfg.SalesDist.Tech.,R&DMktg.Cust.Svc.2.What are the key value drivers for any competitor?InputsOutputs Business Unit St
27、rategyPurchMtgDistCustSvcTechR&DMktgSales3.What is required of our winning strategy?lIndustry structure:today and futurelCompetitors:today and futurelPerformance benchmarks customer needs costs capabilitiesInputslOur guiding strategic principles “any good strategy must.”Outputs Business Unit Strateg
28、ylDevelop optionslEvaluate optionslFinancial analysisprofitcapitalshareholder valueOption AOption BOption ClList of strategic optionslRecommended strategylKey elements for strategyvision and targetsbattlefieldsproducts/markets/customerssource of advantagetarget competitorstop 3 strategic imperatives
29、resource requirementslQuantified full potential4.How do we achieve our full potential?InputsOutputs Strategy FrameworkPurch.Tech.,R&DMfg.Mktg.SalesDistCust.Svc.3.Strategic Principles4.Strategic OptionsOption AOption BOption C1.Business DefinitionTech.,R&DMfg.Mktg.SalesDistCust.Svc.Purch.2.Key Value
30、Drivers Helps determine what business battlefield is most defensible define it too broadly,are overtaken by more focused competitors define it too narrowly,are overtaken by more broadly based competitorsImportance of Business DefinitionThis is our“Magic Dust”.Bain Capital ApproachBusiness definition
31、 is key in Bain Capitals approach.Bain Capital Investment Memorandum4.Proven Analytical ApproachlMarket definitionMarket definition delineates the boundaries where competitive advantage can be established and sustained.Market definition is based on the businesss economics,sharing with other business
32、es and the dynamics of customer behaviourlMarket segmentationlCompetitive positionlCost analysislCapabilities and AssetslManagementlRegulatory,Environmental,Tax,Legal,AccountinglHarvest Analysis1995Invested1997Exit$6 M$327 M050100150200250300350 Wesley Jesson VisionCare StorylAcquired struggling con
33、tact lens manufacturer diversified into all eyewear,retail outlets,solutions/accessorieslLimited cost,distribution and technology overlap suggested business definition was soft contact lens manufacturing onlylDivested everything else and focused on innovating within contact lens only l1997 exited at
34、 400%IRR$MBusiness definition is Bain Capitals Magic Dust as well.Business Definition(Version 1.0)One business with potential for substitutionSeparate businesses with potential for bundlingSeparate BusinessSeparate businesses with potential for cost leadership shiftOne business with potential for di
35、fferentiation or niche positionOne BusinessLowHighHighLowCost SynergiesCustomer Synergies Innovations in Business DefinitionWe have made several improvements to Version 1.0.1.Capability sharing is as critical as cost and customer sharing in defining business boundaries2.Thinking clearly about all of
36、 the dimensions of business definition3.Understanding that business definition is not clear cut4.Recognising that business definition is constantly changing -and getting the timing right5.Competitive position-dominance opens up opportunities for leaders to define boundaries Classic Business Definiti
37、on Dimensions1.Products2.Geography3.Value Chain4.Customer segments5.Channels6.Technology7.CapabilitiesThese are the key dimensions we use-the top 3 usually matter most.42 BrewCo ExampleProductGeographyChannelBackwardIntegrationSoft DrinksSpiritsWineCiderOther Speciality BeersLagerAleStoutMktg.SalesP
38、hysical Dist.WholesalingRetailingUKMulti-Country EuropeEuropean regionEurope and AfricaWestern CountriesDeveloping WorldGlobalRaw MaterialsMaltingBrewingPackagingForwardIntegrationPriceSegmentsCustomerSegmentsClientKey Tool#1 AutoCo ExampleServiceTechnologyGeographyProductBackwardIntegrationTourismU
39、sed Car TradingLeasingRentalInsuranceCreditAfter Sales ServicePartsUKMulti-Country EuropeEurope and AfricaWestern CountriesDeveloping WorldCustomerSegmentsForwardIntegrationClientKey Tool#1 Strategy FrameworkPurch.Tech.,R&DMfg.Mktg.SalesDistCust.Svc.3.Strategic Principles4.Strategic Options1.Busines
40、s DefinitionTech.,R&DMfg.Mktg.SalesDistCust.Svc.Purch.2.Key Value DriversOption AOption BOption C Winning Strategy-CompetitorsCompetitive position defines the boundaries for operating performance.Returns EarnedRelative Market ShareCompetitive PositionWeakStrongLowHighPositive EVANegative EVACost of
41、CapitalOperationsImproved Strategic Position Beer Industry Key Value Driver“Since the beer business is a national business(not global)we were not surprised to see Domestic RMS as the key driver of value.”UKUSAIrelandOp Profit per hl()1510500.1x1x10 x12Domestic RMS8400.1x1x10 x1062108400.1x1x10 x62Be
42、erCo position BrewCo-Cost AnalysisNational/Regional scale is the major driver of operating costs in the brewing industry.InternationalMulti-DomesticNational/RegionalRaw Materials Production/PackagingMktg.SalesDistributionAdmin 20.4/hl 12.0/hl 7.1/hl 1.9/hl 3.1/hl 9.0/hl0%20%40%60%80%100%Total 54/hlP
43、ercent of Costs BrewCo-Customer Needs1.There are sizeable segments of consumers who are prepared to pay a premium price for a product differentiated by taste image fashion2.Brand Loyalty in these segments can overcome distribution weaknesses relative to dominant national brewers3.Dominant local brew
44、ers show little interest in this segment BrewCo-Strategic and Operational Key Value DriversStrategicOrWhere blocked from achieving dominant local positions,seek to build leading brands in premium segmentsSeek to dominate beer markets with full portfolio of brands which lead their respective segments
45、 within national boundariesOperationalAndAndMarketing and sales are the critical activities where brewers can achieve sustainable competitive advantageIn each market,total supply costs must be tightly managedMarketing&Sales must focus on exploiting emerging consumer needs and controlling access to o
46、n-trade distributionKey Tool#250Automobile Industry KVDsEngineering&LaunchingManufacturing&AssemblyMaterials 020406080100%Selling&MarketingRegionalLocalGlobalRegionalCostDriversCostBarand Platform RMS within RegionDistributionCostsNetworkCostsOtherRMS ofOff-PeakTrafficRMS of Low Churn CustomersTotal
47、 Cost per MinuteManageable Key Cost DriversCost per Minute(%of Total)MobileCo-Cost Analysis The key manageable cost drivers were relative market share of low churn customers and relative share of off-peak traffic.MobileCo-Customer NeedsCustomer needs must be understood at each stage in the decision
48、process.Need a Mobile PhoneWill Look for One HereChoose This NetworkWill Stay with This NetworklPrice vs.Fixed LinelBrand awarenesslRetail networklFriends recommen-dationlMy fixed line operatorlTailored offerservice levelpricelIntegration with fixedlPricelHandset upgrade MobileCo-Retention Significa
49、ntly more profit was created by retaining existing customers,rather than attracting new customers.Increased value from retention as opposed to acquisitionValue Created By Reducing Churn By 5%(98-2003)Value Created By Acquiring Equivalent#of New CustomersLifetime NPV($M)Operational1.Maximize high val
50、ue customers2.Maximize low churn customer RMS3.Maximize RMS of off-peak usage 4.Integrate fixed offering5.Align regulator objectives with company strategic objectivesStrategic 1.Manage costs down in line with scale and experience curves2.Maximize network capacity utilization3.Develop world class cus
