Pindelski_Competitive_Strategies

their free time in the mountains caused, in the first decade of the 21st century, a drop of service quality and a significant growth of their prices. The belief that the customers would always visit the town in droves has become an illusion. Along with the development of the road network and skiing centres in the Czech Republic and Slovakia, the customers discovered new places with lower prices and higher standards. Although they had not searched for alternatives so far, then, in consequence of the changes the majority of them moved into another strategic group of suppliers, spending their holidays abroad.

However, we must remember that the analysis of the suppliers and customers forces depends on the specific nature of the organization and context in which such a force acts. So we must not identify the conclusions drawn therefrom without criticism with the entire industry analysis and recommendations for all the entities existing therein.

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Questions and discussions

1.What does the suppliers force depend on?

2.What does the customers force depend on?

3.How can suppliers increase their force towards the customers?

4.How can customers increase their force towards the suppliers?

5.How can the force of customers and suppliers be reduced?

Case study 18

MPR Market Research

MPR is a research company operating in the market and marketing research area. Its undoubted advantages include great experience and the high substantial level of the personnel, particularly of the people responsible for the performance and development of research. The business achieves high marks in brand recognition ratings within the quality research area. However, it also conducts numerous quantitative research projects. They serve business customers, mostly large ones with significant budgets intended for this type of services. It provides them with innovative solutions, frequently outrunning the competitive offers. The role of market innovator, however, is rather difficult and condemns the business to struggle with the problem of winning customers for new solutions and high costs of providing non-standard services.

MPR has numerous customers, the vast majority of them are characterized with longterm cooperation. Nevertheless, only few of them and the cooperation with them cover most of the turnover. At present the business’s first intent is to measure the level of turnover within the existing customers’ group, but also with the simultaneous expansion of the portfolio of customers and the development of the segments served. Among the customers particularly important for the turnover and prestige of the business the following can be specified: Glaxo Smith Klinee, BMW, Roche, Tchibo, Orange, LG Electronics, Sandoz, Tesco, One MS, Lufthansa, Royal Unibrew, UCB and USP Health.

The essence of cooperation with the customers of the industry is the long-term cooperation and satisfaction of the customers’ needs in the scope of various types of research. This is justified by the thorough learning of the industry and accurate

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recognition of its issues, which significantly affects the quality and accuracy of the research performed. At present the organization cooperates with more than 100 customers, nevertheless, more than 17 of the above mentioned are responsible for 80% of the turnover, which complies with the V. Pareto law. However, as the management board indicates, the customers usually restrict themselves to the purchase of one type of service, developing them in subsequent periods and extending the cooperation. As customers, the food industry and production dominate. This is also an industry with relatively constant and stable dynamics of growth. Generally, the market is emerging and this may be stopped within the periods to come. It means that the interest of the businesses in research is significant and that they are interested in various types thereof. This builds a potential for the possible cross-selling and sales with each major customer of additional research products, deviating from those already performed.

The company uses a number of individual suppliers of consulting services in the scope of research, i.e. performance of its core products. Usually these are individuals, high class specialists who cooperate in the performance of project tasks, under the principles of consulting service sales. The list of suppliers of this type is relatively wide, as the company largely tries to select the competencies and tailorcut them to the project type. Moreover, the slightly less significant suppliers in the cost structure are IT companies providing them with licenses for various software, necessary statistical analyses (software for statistical processes and analyses), writing reports (Office package), etc.

Tasks and discussion questions:

1.Assess the force of MPR suppliers

2.Assess the force of MPR customers

3.How can MPR reduce the force of its customers and suppliers?

4.How could the force of MPR customers and suppliers be formed in relation to its plans?

5.What strategic targets towards the customers and suppliers would be suitable for MPR in this situation?

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Further readings

To be read and study by yourself . You can discuss the papers, materials and conclusions during the next class.

1.Porter Michael E., Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York, 1998

2.Pindelski M., Zukowska J., Growth Strategies. Case Study, [in:] ed. J.Czech-Rogosz,

J.Pietrucha, R.Żelazny, Wybrane aspekty przemian strukturalnych, wydawnictwo Uniwersytetu Ekonomicznego w Katowicach, Katowice 2011, pp. 237-245

Bibliography

1.Brandenburger A.M., Nalebuff B.J., Co-opetition, Currency, Doubleday, 1996

2.Combe C., Introduction to Management, Oxford University Press, Glasgow, 2014

3.Geroski P., Gilbert R.J., Jacquemin A., Barriers to Entry and Strategic Competition, Harwood Fundamentals of Pure and Applied Economics, Routledge, Abingdon, Oxon, 2007

4.Porter M.E., Competitive Strategy: Techniques for Analyzing Industries and Competitors, Free Press, New York, 1998

5.Porter M.E., Strategy and the Internet, Harvard Business Review, March 2001

6.Porter, M.E. (1979), How Competitive Forces Shape Strategy, Harvard Business Review, March/April 1979

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8. Assessment of a firm's competitive position.

Presentation and assessment of various methods of a company

strategic potential analysis.

Key success factors. Value chain analysis. Strategic balance of a firm.

Pre-class readings:

1. Ghemawat Pankaj, Rivkin Jan W., (2006), Creating Competitive Advantage, Harvard Business School, February 25, 2006

Article available on: http://www.merageinstitute.org/wp-content/uploads/2012/02/Creating-competitive- advantage.pdf

Task: Prepare a short presentation demonstrating the main thesis, assumptions and conclusions of the article.

Additional questions to be answered and/or discussed after pre-class readings:

1.What may make a company successful on an attractive market ?

2.What is the meaning of a value chain concept?

3.How does one make a profitable link between the customers willingness to pay and a suppliers need to earn ?

4.How does one differentiate other suppliers ?

5.How does one link the defragmentation of the company with one view of the whole ?

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8.1 Key Success Factors

The method of assessing the competitive position of companies in a sector, is the analysis of Key Success Factors (KSF), i.e. any important resources, competences, activities and results of the operations necessary to achieve success in a specific field of activity.

In order to identify key success factors, answers to the following questions are required:

•Who are the buyers and what influences their selection of a product and its suppliers?

•What does the bidder need to have and do, in order to gain competitive advantage?

•How does one acquire a sustainable competitive advantage, at least short term?

Establishing the basic success factors, allows for the verification of a company's developmental opportunities. This is done by the assessment of key success factors, which play the role of criteria, in relation to the company and its competitors. It is important to stress the diversity of the key success factors based on the type of business and industry in which the company operates.

In order to effectively carry out the analysis it is necessary to find specific factors, unique to a particular industry. As a general rule, the right number of elements is approximately 3 - 6. The elements that analysts highlight the most are the: market position, level of business organization, profitability, contribution to production costs, external business image and the technological level21. During the analysis of the key success factors, a comparison with companies operating in a specific industry is also made.

Correct identification of the Key success factors (CSF) allows the right prioritization in strategic planning, including: choosing the right operating segment, the correct allocation of resources, improvement of competences crucial in a given field of activity.

The table below presents key success factors for a company in the dental industry and for its largest competitor.

Tab.16 Examples of Key success factors of two dental - office chains

21 http://mfiles.ae.krakow.pl/pl/index.php/Kluczowe_czynniki_sukcesu

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The result obtained from the KSF analysis, indicates that mainly the low prices and the quality of the services make it possible for a company to rise on the market. The market position is at a low level, so the company loses the most points on the leader board, up to 0.75, which mainly affects the final evaluation.

The table below presents the company's strengths and weaknesses. 1- 3 ratings are considered to be the company's strengths, whereas the 4 - 5 form weaknesses.

Tab.17 Examples of company's strengths and weaknesses evaluation

After the analysis, it is shown that image and market position are amongst the weaknesses, whereas the activity area, competitive prices and quality of products and services form the strengths.

During the company's analysis, all factors which impact the current and future business position, are taken into consideration. The SWOT analysis identifies these factors and helps to create a plan expanding the positive factors and reducing the negative ones,

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nevertheless, only those which have a critical influence on the company. Identifying the critical factors, however, constitutes only a half of the analysis. The next step is to create a strategy that will help to, most effectively, exploit the opportunities, improve strengths, minimize risks and overcome weaknesses.

Establishing key success factors and their later examination are designed to identify potential advantages of organizations on the market. The first and basic step is the selection of the main criteria, used for further analysis. They are not only dependent on the company, but also the type of industry, stage of development, its economic situation and competition, etc. It is important, however, to list the industry specific factors, in which the entity does or intends to operate. Usually the number of factors should be 5, but not less than 3. Such a small number is based on the Pareto Principle (see: Pareto Principle description), according to which 20% of the input generates 80% of the result.

Exercise 12

The Pareto Principle

Also known as the ABC analysis, was founded by Vilfriedo F. D. Pareto (1848-1923), an Italian economist and sociologist. The principle assumes that finding and focusing on 20% of the items (causes), produces 80% of the results (e.g., gains, losses, problems, etc.). The extension of this approach, the remaining 30% of elements give a 10% effect, and the final 50% gives another 10 %. This can be presented as, for example:

-20% of our customers buy 80% of our goods, the next 30% buy 10% and the remaining 50% of customers buy the rest, which is 10% of the goods.

-20% of operations absorb 80% of our time.

-20% of information affects 80% of the decisions made.

Simply stated, the vast majority of events are caused by a small amount of factors. Improvement or reduction of that 20%, significantly affects the final result, the entire process, overview of the situation or the effect. At the same time, establishing that 20% allows you to override others and is significantly a less important factor.

Tasks and discussion questions:

1. Do you think that Pareto Principle may be related to all the businesses ?

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2.List at least 10 of your daily routine activities and evalute how long does it take to accomplish any of them ?

3.Think, which one is the most important, and which is last important.

4.Put them into the diagram below:

Is very important

to me

Is not that

important to me

Is rather

unimportant

5.Which one takes you most of the time ? Which one is most important ?

6.What do you think about your activities ? Would you like to change the way they are accomplished ?

The most frequently cited success factors are: the business organization's manner, competitive position on the market, the achieved level of profitability, high margin, brand and image, the level of advancement of technology, uniqueness of the implementation process or the crew structure.

Besides the general industry characteristics, its life cycle and current phase should also be considered. Usually, in the first introductory phase, for example, the level of the advancement of technology solutions is very important. In the growth phase (the second phase), it may be the market shares and/or their potential increase. The maturity phase (phase three) is the time, in which the dominant role includes performance and effectiveness, and in the last, end-stage phase, cost structure and the ability to reduce prices becomes of the most important. It is worth having a good sense of which phase a given industry is at (e.g., segment B car manufacturing - maturity phase with the signs of the end-stage).

Through the research carried out by Boulton and managers of leading American companies, the question of what current measures of success will be controlling them in

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the future was answered. Answers provided in the graph below, clearly indicate that the most important are customer satisfaction, staff stability and revenue growth. So there are clearly some key aspects of creating a market value in today's economy. As to the question of how organizations creat value, meaning what are their sources, authors answer - by simply taking a risk and creating a unique combinations of assets22.

The greatest successes in this field are achieved by the entities, whose farsightedness is reinforced by the ability of combining assets in a very unprecedented way. It is therefore not to overestimate the role of the manager - the leader and the support of his/her team and the board of directors.

Fig.12 The main measures of success according to managers working in the USA

patents and new products factor price profit rate of return on investments

rate of return on assets company's image among stockholders market shares brand recognition

investments in technologies net operating margin net profit margin revenue growth staff stability customer satisfaction

Source: Boulton, R.E.S., Libert B.D., Samek S.M., Cracking the Value Code. How Successful Businesses are Creating Wealth in the New Economy, Harper Collins, New York, 2000, p.15

Exactly the same questions that R. Boulton and others have posed the US managers, were also posed23 in a survey to the 32 key managers of companies listed on the WSE. The results are shown in the table below.

Fig.13 The main measures of success according to managers working in Poland

22Boulton, R.E.S., Libert B.D., Samek S.M., Cracking the Value Code. How Successful businesses are Creating Wealth in the New Economy, Harper Collins, New York, 2000, p.36

23The results of the research carried out in the Department of Management Theory, the Warsaw School of Economics (SGH) May-July 2002. Research under the direction of M. Pindelski. Unpublished material.

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