Business Unit Strategy Framework

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1、Business 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 StrategyBusiness Unit Strategy set

2、s 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 competenceslPrioritises strategi

3、c imperativeslDefines potential adjacent expansion opportunitiesCorporate StrategyBusiness Unit StrategyBusiness Unit StrategyMarket StrategyProduct StrategyChannel StrategyFunctional Area StrategyProduct StrategyChannel StrategyFunctional Area StrategyMarket Strategy The Bain ToolkitBusiness Defini

4、tion 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 ReductionParent Value AddedChan

5、ge 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 Strategy?lHow do we devel

6、op 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 serve customers than t

7、he 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 minded businesses genera

8、lly 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.Maximizing customer satisf

9、action 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 we develop a good Str

10、ategy?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.”-Jack Welch,CEO Gene

11、ral 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 technologies.”-Robert Gal

12、vinCEO 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 a Strategy?lWhat is a

13、 good Strategy?lWhat are the key elements of a Strategy?lHow do we develop a good Strategy?lKey TakeawayslFrequently Asked QuestionsStrategy Development Tools Iraqi WarIraq invaded Kuwait,declared Kuwait a provinceUN Security Council declared annexation void An alliance of Nato and Middle East count

14、ries appointed General Schwartzkopf+Security Council of Allied forces Colin Powell to command the Allied ForcesYou are general Colin PowellYou need a strategy(“lets call it Desert Storm”)August 1990January 1991What are the critical elements of Strategy?Desert StormK U W A I TI R A QS A U D I A R A B

15、 I AI R A NBaghdadNasiryahKuwait CityBasra Iraqi War-Key Elements of StrategyRemove the Iraq threat to KuwaitNot to annihilate Iraq1.GoalsNot Iraq;Kuwait and Southern border of Iraq2.BattlefieldPrecision bombing attacks followed by sea and land attack4.Weapons1.Speed,so Saddam had no time to mobilis

16、e 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.Enemy3.20m people4.100K National Guard

17、 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.Management,employees&money(res

18、ources)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 Unit Strategy PyramidA pyramid he

19、lps 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-driven PD Process2.Source of

20、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 ImperativesAchieve lowest tot

21、al 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 processPremium strategyDistrib

22、ution 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 How Do We Develop B.U.Strategi

23、es?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 Core Steps Strategy FrameworkPu

24、rch.Tech.,R&DMfg.Mktg.SalesDistCust.Svc.3.Strategic Principles 4.Strategic Options Option AOption BOption C1.Business Definition Tech.,R&DMfg.Mktg.SalesDistCust.Svc.Purch.2.Key Value Drivers Business Unit Strategy1.What are the markets competitive boundaries?lActivities currently performedlCurrent a

25、nd future business definitionproducts/services?global,regional,local?which value chain elements?technology?InputslBusiness definition lIssues raisedOutputs Business Unit StrategylCustomer needscustomer segmentationwhat is important?how differentiable?lCost analysislargest manageable componentscost s

26、haringcapital 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 StrategyPurchMtgDistCustSvcTechR&DM

27、ktgSales3.What is required of our winning strategy?lIndustry structure:today and futurelCompetitors:today and futurelPerformance benchmarkscustomer needs costscapabilitiesInputslOur guiding strategic principles “any good strategy must.”Outputs Business Unit StrategylDevelop optionslEvaluate optionsl

28、Financial analysisprofitcapitalshareholder valueOption AOption BOption ClList of strategic optionslRecommended strategylKey elements for strategyvision and targetsbattlefieldsproducts/markets/customerssource of advantagetarget competitorstop 3 strategic imperativesresource requirementslQuantified fu

29、ll potential4.How do we achieve our full potential?InputsOutputs Strategy FrameworkPurch.Tech.,R&DMfg.Mktg.SalesDistCust.Svc.3.Strategic Principles 4.Strategic Options Option AOption BOption C1.Business Definition Tech.,R&DMfg.Mktg.SalesDistCust.Svc.Purch.2.Key Value Drivers Helps determine what bus

30、iness battlefield is most defensibledefine it too broadly,are overtaken by more focused competitorsdefine it too narrowly,are overtaken by more broadly based competitorsImportance of Business DefinitionThis is our“Magic Dust”.Bain Capital ApproachBusiness definition is key in Bain Capitals approach.

31、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 businesses and the dynamics of customer be

32、haviourlMarket segmentationlCompetitive positionlCost analysislCapabilities and AssetslManagementlRegulatory,Environmental,Tax,Legal,AccountinglHarvest Analysis Wesley Jesson VisionCare StorylAcquired struggling contact lens manufacturer diversified into all eyewear,retail outlets,solutions/accessor

33、ieslLimited 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 400%IRR$MBusiness definition is Bain Capitals Magic Dust as well.Business Definition

34、(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 differentiation or niche positionOne BusinessLowHighHighLowCost SynergiesCustomer Syner

35、gies 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 the dimensions of business definition3.Understanding that business definition is not

36、 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 Definition Dimensions1.Products2.Geography3.Value Chain4.Customer segments5.Channels6.Technol

37、ogy7.CapabilitiesThese are the key dimensions we use-the top 3 usually matter most.BrewCo ExampleProductGeographyChannelBackwardIntegrationSoft DrinksSpiritsWineCiderOther Speciality BeersLagerAleStoutMktg.SalesPhysical Dist.WholesalingRetailingUKMulti-Country EuropeEuropean regionEurope and AfricaW

38、estern CountriesDeveloping WorldGlobalRaw MaterialsMaltingBrewingPackagingForwardIntegrationPriceSegmentsCustomerSegmentsClientKey Tool#142 AutoCo ExampleServiceTechnologyGeographyProductBackwardIntegrationTourismUsed Car TradingLeasingRentalInsuranceCreditAfter Sales ServicePartsUKMulti-Country Eur

39、opeEurope and AfricaWestern CountriesDeveloping WorldCustomerSegmentsForwardIntegrationClientKey Tool#1 Strategy FrameworkPurch.Tech.,R&DMfg.Mktg.SalesDistCust.Svc.3.Strategic Principles 4.Strategic Options 1.Business Definition Tech.,R&DMfg.Mktg.SalesDistCust.Svc.Purch.2.Key Value Drivers Option AO

40、ption BOption C Winning Strategy-CompetitorsCompetitive position defines the boundaries for operating performance.Returns EarnedRelative Market ShareCompetitive PositionWeakStrongLowHighPositive EVANegative EVACost of CapitalOperationsImproved Strategic Position Beer Industry Key Value Driver“Since

41、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 x62BeerCo position BrewCo-Cost AnalysisNational/Regional scale is the major driver of o

42、perating costs in the brewing industry.Percent of Costs BrewCo-Customer Needs1.There are sizeable segments of consumers who are prepared to pay a premium price for a product differentiated by tasteimagefashion2.Brand Loyalty in these segments can overcome distribution weaknesses relative to dominant

43、 national brewers3.Dominant local brewers 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 brand

44、s which lead their respective segments 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 cons

45、umer needs and controlling access to on-trade distributionKey Tool#2Automobile Industry KVDsEngineering&LaunchingManufacturing&AssemblyMaterials 020406080100%Selling&MarketingRegionalLocalGlobalRegionalCostDriversCostBarand Platform RMS within Region50Total Cost per MinuteManageable Key Cost Drivers

46、Cost 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 process.Need a Mobile PhoneWill Look for On

47、e HereChoose This NetworkWill Stay with This NetworklPrice vs.Fixed LinelBrand awarenesslRetail networklFriends recommen-dationlMy fixed line operatorlTailored offerservice levelpricelIntegration with fixedlPricelHandset upgradeMobileCo-Retention Significantly more profit was created by retaining ex

48、isting 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 value customers2.Maximize low churn customer RM

49、S3.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 customer service and billing capabilities4.Maxi

50、mize customer retentionMobileCoThe strategic and operational key value drivers were as follows:Key Tool#2 Strategy FrameworkPurch.Tech.,R&DMfg.Mktg.SalesDistCust.Svc.3.Strategic Principles 4.Strategic Options Option AOption BOption C1.Business Definition Tech.,R&DMfg.Mktg.SalesDistCus.Svc.Purch.2.Ke

51、y Value Drivers 90%of industry profits were earned from areas adjacent to auto manufacturingThe manufacturing profit pool was likely to shrink before it grew and perhaps go negativeMergers offered significant economic opportunitiesAutoCo-Industry StructureTo identify strategic principles,AutoCos ind

52、ustry structure today and in the future was examined.1.2.3.AutoCo-CompetitorsKey Tool#3(2)02460.20.412Relative Market Share(3-year cumulative)BMWGMPSAFordMercedesFiatRenaultVW GroupPre-tax Return on Sales(3 year average)Overperforming or milking?Underperforming or investing?Premium brands were overp

53、erforming while VW Group was investing to gain share.AutoCo-Competitors(Future)1996VW Group was investing to consolidate its platforms(chassis)such that its Weighted Average Platform RMS would significantly exceed Auto-Cos by 2002.2002 AutoCo-Performance BenchmarksAreas of potential advantage were i

54、dentified.lAutoCo currently undifferentiatedlAutoCo has greater potential with“family-oriented”segments(C/CD Platforms)lAutoCo currently matched competition on Platform RMS,but could focus on fewer platforms and leverage other secondary cost driversregional scalecross platform-sharingglobal scalelAr

55、eas offering AutoCo greatest scope for competitive advantage arecostproduct development process based on customer insightdistribution network/customer careconsumer insightcustomer careCostsCapabilitiesCustomer Needs AutoCo-Strategic PrinciplesAny“winning”AutoCo European Strategy must:Achieve lowest

56、cost 1.2.3.FocussegmentsgeographiesplatformsOccupy premium segments Find adjacent revenue growth sources4.Strategy FrameworkPurch.Tech.,R&DMfg.Mktg.SalesDistCust.Svc.3.Strategic Principles 4.Strategic Options Option AOption BOption C1.Business Definition Tech.,R&DMfg.Mktg.SalesDistCust.Svc.Purch.2.K

57、ey Value Drivers Strategic OptionsThere are a number of generic strategic options.l Seek to winl Seek tol Seek to changeDominateRedefineFocusDifferentiateLow CostDefinitionwithin a specific market segmentdominate a given market by participating across all segments of the marketthe definition of a ma

58、rket by expanding beyond its traditional boundariesThese are shown graphically below.Strategic Options1.FocusSegment 3Segment 22.Dominate3.RedefineBusiness ARelated Business BRelated Business CMarketsSegment 1Key Tool#4BrewCo-Strategic Options Worlds leading speciality beer companyGlobal Brand Licen

59、sor(to highest bidder in each local market)FocusDominateGlobal merger with Brewing Company(most domestic overlap)The strategic options for the brewing company were identified and a“focus”strategy selected.A.Seek to dominate beer markets with a full portfolio of brands which lead their respective seg

60、ments within national boundaries“The BrewCo vision is to be the worlds most successful marketer and producer of premium beer brands,with particular emphasis on the BrewCo brand.”Full Portfolio:l Irelandl Spain l MalaysiaB.Where blocked from achieving dominant local positions,seek to build leading br

61、ands in premium segmentsGrow Premium:l USl European ExportBrewCo-VisionThe vision for the“focus”strategy was then developed.MarketsBrewing Co-Full PotentialOperatingProfit(M)StrategicPlanKey Tool#5And the full potential calculated.MobileCo-Strategic OptionAs Market Growth slows,MobileCos 0.2 x RMS w

62、ill“freeze”below acceptable Return on Capital.Return on Sales(ROS)MobileCo-Strategic Options MobileCos weak strategic position in a slowing growth environment dictated the following strategic options be reviewed.Issues:Option 1Option 2Option 3Option 4Focus on fastest growing segmentsControl selected

63、 fast growth channels of distributionAggressive price-led share gain strategyAcute Differentiation StrategySize of growth segmentsDataValue-added voice applicationslCost of“acquiring”channelslShort-term profit goalslIPO implicationslOrganisational challengeMobileCo-Option EvaluationStrategic Princip

64、lesThinkTools were used to evaluate the options.Generic OptionsMobileCo-Option EvaluationThe output of ThinkTools showed that“differentiation”was the only way to survive.DifferentiationDifferentiationShort TermLong Term 1.Vision2.Competitive Advantage3.Target Competitors4.Principal Battlefields5.Str

65、ategic Imperatives6.Key InitiativesMobileCo-Option Evaluation 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 Business DefinitionKey Value Drivers

66、Strategic PrinciplesKey TakeawaysThere are 6 key tools to take away.OptionsFull Potential Strategy38TEMPLATES-ICONbcLONTodayFuture020406080SHVKey TakeawaysThere are 6 key tools to take away.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 Frequently Asked QuestionsWhat is my agenda with the client?Frequently Asked Questions1.Point of Departure2.