Prof. Dr.

Luis Marijun
Strategy and Competition.
Economical analysis for
management.

GERMANIO SA
MANUFACTURING COSTS AT 31.05.07 en K
Employees
Maintenance and lab equipment
Safety equipment and material
External contractors
General Overheads
Raw Materials
Services (electricity, gas, water)
Thorium sales margin
Wastes and effluent treatment
Manufactured product i tons
SELLING EXPENSES AT 31.05.07 en K
Distribution costs
(20% fixed and 80% variable) Warehousing
Transport
Customs and documents
Commercial Sevices
Invoicing and despatching
Marketing
Wages
Travelling ans social expenses
TOTAL

MONTH
351,58
133,58
20,43
476,59
214,11
2994,26
610,24
172,44
101,79

YTD
1761,36
612,83
102,50
2181,18
1029,52
12575,88
3008,70
830,77
484,65

6684

33727

39,1
662,17
25,95

203,3
3377,06
121,92

29,35

149,71

64,21
13,21
8,3
833,99

344,78
70,45
44,1
4311,32

GERMANIO SA
MANUFACTURING COSTS AT 31.05.07 en K
Employees
Maintenance and lab equipment
Safety equipment and material
External contractors
General Overheads
Raw Materials
Services (electricity, gas, water)
Thorium sales margin
Wastes and effluent treatment
Manufactured product i tons
SELLING EXPENSES AT 31.05.07 en K
Distribution costs
(20% fixed and 80% variable) Warehousing
Transport
Customs and documents
Commercial Sevices
Invoicing and despatching
Marketing
Wages
Travelling ans social expenses

MONTH
351,58
133,58
20,43
476,59
214,11
2994,26
610,24
172,44
101,79

YTD
1761,36
612,83
102,50
2181,18
1029,52
12575,88
3008,70
830,77
484,65

F/V
F
F
F
F
F
V
V
V
V

6684

33727

39,1
662,17
25,95

203,3
3377,06
121,92

Mix
V
V

29,35

149,71

64,21
13,21
8,3

344,78
70,45
44,1

F
F
V

FIXED COSTS in K
Manufacturing
Employees
Maintenance and lab equipment
Safety equipment and material
External contractors
General Overheads
Total Manufacturing Fixed Costs

4227,26
1470,79
246,00
5234,83
2470,85
13649,74

Overheads and others

General costs
Depreciations and amortizations
Total Overheads

3500,00
5700,00
9200,00

Marketing and selling expenses

20 % Warehouses
Inovicing and despatches
Wages
Travelling and social expenses
Total marketing and selling expenses fixed costs

97,58
359,30
827,47
169,08
1453,44

TOTAL FIXED COSTS

ytd*12/5

24303,18

VARIABLE COSTS in /te

Manufacturing
Raw materials
Services (electricity, gas, water)
Wastes and effluent treatment
Thorium sales margin
Total variable production cost

372,87 ytd/prod ytd

89,21
24,63
-14,37
472,34

Marketing and selling expenses

80 % Warehousing
Transport
Customs and documents
Comissions
Total marketing and selling expenses variable costs.

4,82 ytd/prod ytd

98,01 ytd/sales ytd
3,54
1,28
107,65

TOTAL VARIABLE COSTS IN /ton

579,99

PRICE
/Kg

Um

0,9
1,1
1,3
1,5
1,7
1,9
2,1
2,3
2,5

75945
46736
33754
26416
21699
18411
15989
14130
12658

Introduction to Strategy

FUNCTIONAL ORGANIGRAM

CEO

Human
Resources

Legal

Marketing

Financing

Price
Product
Promotion
Placement

Treasury and Banks

Financing
Legal Accounting
Analytical
Accounting
Taxes

Operations

STRATEGY CONCEPT: Definitions of strategy

The combination of competitive moves and business approaches

that managers employ to please customers, to compete
successfully, to conduct operations and to achieve organizational
objectives. (Thomson)
To determine long term objectives, needed action plans for
available resources allocation in order to achieve efficiently these
objectives. (Chandler)
Corporate strategy refers to be different. It means intentionally to
choose to different activities in order to achieve an unique value.
(Porter)
To achieve leadership and to stay there, this is the base of
strategy: to create a competitive advantage. The strategy does
not rest in being better, but in being different. (Porter)

STRATEGY CONCEPT: Basic ideas

The strategy is related to organisation positioning in order to

achieve a sustainable competitive advantage.
It means to consider the options in which companies want to
participate, what are the product and the services are going to be
offered, and how to allocate corporate resources in order to
achieve the competitive advantage.
Its fundamental goal is to create value for shareholders but also
giving value to the customer.

STRATEGY PROCESS: Global picture

The analytical process of strategy definition is:
Anlisis
External
Analysis
Externo

Misin
Vission,y
Mission,
objetivos

Diseo
de
Strategies
Design
estrategias

Objectives

Evaluacin
Evaluation
selection
y&seleccin

Puesta
en
Operational
Aspects
prctica

Anlisis
Internal
Analysis
Interno

STRATEGICAL
ANLISIS
ANALYSIS
ESTRATGICO

STRATEGIES
FORMULACIN
DEFINITION
ESTRATGICA

STRATEGIES
IMPLANTACIN
IMPLEMENTATION
DE ESTRATEGIAS

Control
Control

STRATEGY PROCESS: Global picture

Strategic thinking includes three main steps:

Where are we now ?: To analyse where the business is.

What is our mission? What are our key objectives ?
Environment tendencies evaluation. SWOT analysis.

Where are we going to?: strategic alternatives generation,

based on tendencies, change drivers

How do we arrive there ?: gap between current skills and

the ones needed for achieving the strategic goal must be
minimised.

STRATEGY LEVELS: Global picture

Corporate Strategy
Management action plan for diversified
companies (Activity area)

What combination of
business or activities

Business Strategy
Management action plan for one business or
division (Distinctive skills and competitive
advantages.)

How to compete in each

business?

Functional Strategy
(Distinctive skills)

How to use the resources?

STRATEGIC BUSINESS UNIT CONCEPT: Key for diversified

companies, where business heterogeneity makes impossible
a single approach.

Unit analysis other than full company.

Starting point for strategic analysis development and strategy
formulation in a diversified company.
Good tool for better understanding of specific facts and reality
Strategic segmentation based on: products, markets and
production process
Three dimensions: customers, functions, technology

STRATEGIC PROCESS FACTORS

Overall business evolution: It makes formal planning difficult. It

obliges to create emerging strategies. Only the most valid
companies able to find the right strategies will survive.
Corporate management: Managers control
Stakeholders (Groups of interest): shareholders, customers,
employees, Unions, suppliers, banks, community
Business ethics: Corporate Social Responsibility
Culture context and social environment: company culture
plays a key role on strategic planning and even in strategy
implementation.

MISSION STATEMENT or BUSINESS PURPOSE

Companys present business scope and purpose.
who we are, what we do and why we are here.

Principles declaration
Integrated in believes and values system
Must be well known by all the organization
Unity and identity element.

Gives stability to the company in relation with its identity.

Stable on the time, but can be modified if there are reasons
for it.
Usually defined by activity field or essential skills.

Sometimes is not explicit or even written

Difficult to define in diversified companies (specially for non
related diversifications).

VISION
Strategic purpose: where we are going and why

Intentions declaration about desirable long term future.

Summary of the company strategic focus.
Characteristics:

Success idea must be incorporated ( company basic

challenge)

Stable with time

Worthy for employees compromise and effort

VISION and MISSION Examples

Greenpeace strategic vision: To halt environmental abuse and

promote environmental solutions
Microsoft Corporation vision: Empower people through great
software any time, any place and on any device
Trader Joes (unique grocery store chain) mission: to give our
customers the best food and beverage values that they can find
anywhere and to provide them with the information required for
informed buying decisions.

STRATEGIC OBJECTIVES
They give guidelines to make vision and mission
operational

Objectives are on organizations performance targets the

results and outcomes it wants to achieve. They function as
yardsticks for tracking an organisations performance and
progress
Financial objectives: relate to the financial performance
target management has established for the organisation to
achieve.
Strategic objectives: relate to target outcomes that indicate a
company is strengthening its market standing, competitive
vitality and future business prospects. Measurable by
indicators. Important to analyse driver/outputs effects.
Balanced Scorecard.

External strategic analysis

INFORMATION AGE LAWS

Metcalfe law: the value of a communications network is directly

proportional to the square of members number.
Moore law: every 18 months computers capacity doubles.
Fracture law: economical, political and social systems change
incrementally. Technology changes exponentially
Reducing signatures law: the reduction of transactional costs
allows the growing of third parties services providers and ,
temporary grouping and the reduction of intermediaries.

GENERAL ENVIRONMENT CHANGES:

SOCIAL AND DEMOGRAFIC

Life expectation is growing in Europe, Japan and USA

Many social changes: working women, marriage at older age,
increasing of only one member families, divorce increasing,
different and new life styles.
Increasing number of pensioners: big opportunity and threat.
Seniors: increasing demand for specific product and services.

GENERAL ENVIRONMENT ANALYSIS:

PEST ANALYSIS

Pest objective: to identify variables affecting future strategy.

Dimensions:

Political/legal: Political, legal and administrative variables.

Economical: most relevant economical factors in the

studied area. Main economical indicators are used

Sociological and cultural: values, believes, attitudes, life

standards, demographic conditions, ecological factors,
religion, educational and ethical factors.

Technological: technological level in the area, potential for

growing.

PEST ANALYSIS :

ENVIRONMENT STRATEGIG PROFILE

1
Political and Legal
Penal regulations
Disable regulations
Salary regulations
Political situation
Economical policy
Tax policy
Economical
GPI index growing rate
Inflation rate
Unemployment rates
Payments balance
Productivity
Capitals market
Energy resources
Industrial policy
Economical policy (taxes and monetary)
Development level
Social and Cultural
Population age
Acquisition power
Ethnics
Geographical distribution of population
Gini index
Working women
Temporary workers
Environmental awareness
Social conflictivity
Unions power
Education level
Technological
Internet use
Genetics engineering
Wireless communications
R&D policy
New technologies access
Innovation capacity

RELEVANCY
2
3

SECTOR ANALYSIS

Industry or Sector: group of companies developing the same

economical activity, selling a well defined product, or a line of
similar products. Related to similar products or similar production
process.
Limits criteria: technology (similar production process) market
(product/services satisfying similar needs).
Diversified companies: difficult classification, temporary
grouping and the reduction of intermediaries.

SECTOR ANALYSIS:
Five-Forces Model of Competition. Michael Porter(1982)

Objective: to put on the table the

industry opportunities and threats,
that determine ability for getting
profits.
Porters Five Forces model:
powerful methodology for
opportunities and threats analysis
Rivalry level in a industry is the
result of the action of the five
competition forces, and that define
the possibility of getting profit.

SECTOR ANALYSIS: Intensity of Rivalry among

existing competitors.

The higher the rivalry the lower the profitability and industry attractive.
Factors:
Number of players and equilibrium amongst them. Concentrated or
fragmented industries.
Industry growth rate: the lower the higher rivalry.
Switch barriers: obstacles that make difficult movement from one
segment to other.
Exit barriers: they make difficult to leave an industry, even with negative
results e.g.. : specialized assets, exit fixed costs, strategic
interrelationships, emotional barriers, social or governmental restrictions

SECTOR ANALYSIS: Intensity of Rivalry among

existing competitors.

Factors (II):
Cost structure: the higher the fixed costs the higher pressure for
operating at full capacity
Products differentiation: the higher differentiation the less rivalry. Low
differentiation: price and service decision factors.
Switch costs: for suppliers and customers reduces rivalry. (mobile
phones)
Production capacity: the higher, the higher rivalry
Strategic interests: there are companies ready to lost money temporary
for being present in a key market.

SECTOR ANALYSIS: Potential New Entrants

New entrants is a threat for the sector, it will increase existing rivalry, and it
will reduce the sector attractiveness. Sector profitability level is a driver for
new entrants.

Access factors for new entrants :

Entry Barriers
Existing competitors reaction

SECTOR ANALYSIS: Entry Barriers

There are mechanisms to avoid the access of new entrants to an industry

by reducing their profitability expectations.
Entry barriers types:
Absolute: impossible to overcome unless exceptions: pharmacy,
telephone, radio broadcasting, TV.
Relative: they can be overcome
Main Entry barriers:
Scale economy and scope economy
Product differentiation
Capital needs
Customer switch costs
Distribution channels access
Government policy: licences, minimum capital requirement, technical
standards

SECTOR ANALYSIS: Existing competitors reaction

If the existing competitors reaction is strong enough, new entrants can be

persuaded not to enter.
Retaliation probability:
Retaliation antecedents in the industry: prices war, massive
advertising campaigns, special offers
Financially strong existing players: cash available, not used credit
capacity, spare production capacity, advantage in distribution channels

SUBSTITUTE PRODUCTS COMPETITIVE PRESSURE

they satisfies same needs
Same needs from the customers point of view, not relevant
from what industry
The higher number of substitute products the lower the
attractiveness of the industry.
Factors:

Actually cover customer needs

Relative price of substitute products compared to the

industry

Obsolescence coming from substitutes

Switch costs, even emotional.

CUSTOMERS AND SUPPLIERS BARGAINING

POWER
The higher the bargaining power of customers and suppliers,
the lower the attractiveness of the industry.
Bargaining power of customers and suppliers is not always
homogeneous for all of them.
Bargaining power factors:

Industry concentration

Transactions volume

Differentiation

Switch cost

Relative profit customer/supplier

Actual threat of vertical integration

Information level

Perishable goods.

STRATEGIC ALLIANCES

Definition: agreement between two or more companies in any

activity field in order to develop a joint action, related to suppliers,
customers, a production step or technological research.
Drivers:

Fill the gap with current markets and technology

To make profitable redundant production capacity

Speed up new products development

Achievement of scale economy

To overcome legal and commercial barriers.

Increase the scope of the current operations

Reduce exit costs when disinvesting

TIPES OF STRATEGIC ALLIANCES

PRODUCT MANUFACTURING OR SEVICES PROVIDER:

Carlsberg Malawi, One World
PROMOTIONAL: Sunday newspapers insertions, web links
LOGISTICAL: Mineral water distribution by beer companies.
PRICE COLLABORATION: Same customers: hotels/ car
renting/airline.

CLASIC SEGMENTATION CRITERIA

SEGMENTATION VARIABLES

Geographical

Demographic: sex, ages

Behaviours: home based, street, business

Psychological: attitudes, values, personnel objectives,

ambitions .

INDUSTRIAL B2B vs CONSUMPTION MARKET

CONSUMPTION MARKET

FEW RELATION. IMPULSE FACTOR

RELEVANT

INDUSTRIAL B2B
BUYER PRODUCER
RELATIONSHIP

CUSTOMERS PORTFOLIO

A LOT OF RELATIONSHIP.
IMPULSE FACTOR NOT
DECISIVE
SMALL CUSTOMERS NUMBER

LACK OF NEGOTIATION

NEGOTIATION PERIOD

LONG NEGOTIATION PERIOD

EASY MOTIVATION

DECISION PROCESS

COMPLEX MOTIVATION

HIGH SENSIBILITY TO PRICE

PRICE

LOW SENSIBILITY TO PRICE

HIGH CUSTOMERS NUMBER

INDIRECT COMMUNICATION
BIG INFLUENCE AREA

TECHNICAL SERVICE NOT

RELEVANT

COMMUNICATION
DISTRIBUTION
TECHNICAL ASSITANCE

DIRECT COMMUNICATION
SMALL INFLUENCE AREA
TECHNICAL ASSISTANCE
SERVICE RELEVANT

DECISION FACTORS IN B2B MARKETING

Product quality consistency with time

Adequate product portfolio
Technical assistance and service level
Sales rep visits frequency

Delivery on time (OTIFIC)

Price

STRATEGIC CUSTOMERS FOCUS

PROFITABLE CUSTOMERS

YES
Service increase
MS increase

Decrease service level

for attributes not
valuable to
to customers

Product improvement

Bye

NO
NO
DISLOYAL CUSTOMERS

YES

Internal Strategic Analysis

Value Chain
Value chain activities are: basic or support

COMPANY INFRASTRUCTURE
HUMAN RESOURCES MANAGEMENT
SUPPORT
ACTIVITIES

TECHNOLOGY DEVELOPMENT
PROCUREMENT

BASIC
ACTIVITIES

INTERNAL
LOGISTICS

PRODUCTION

EXTERNAL
LOGISTICS

SALES AND
MARKETING

TECNICAL
ASSISTENCE

VALUE CHAIN
Primary activities form the company basic production process

Internal logistic: Reception, warehousing, stock control, raw

materials internal distribution
Operations or Production: physical transformation of raw
materials/factors in products/services.
External logistics or Distribution: warehouses and physical
distribution
Marketing: sales process
After sale service and Technical service.
Product quality consistency with time

VALUE CHAIN : SUPPORT ACTIVITIES

They support primary activities, guarantying company operation

Procurement: purchase or raw materials and factors to be used.

Technology development: getting, improving and developing of
the product and process technology
Human Resources management: searching, hiring, training,
motivation
Infrastructure: Planning, control, organisation, accounting
information, finance. Operations or Production: physical
transformation of raw materials in products.

Value System
It includes value chains of suppliers, customers

SUPPLIERS VALUE

COMPANY VALUE

CUSTUMER VALUE

VALUE/SYSTEM CHAIN AND COMPETITIVE ADVANTAGE

Links interconnections give competitive advantage

Competitive advantages arise from activities interconnections

between activities (horizontal links) and/or the value system
(vertical links)
Competitive advantage trough links can come from:

Optimisation: cost reduction

Coordination: interconnection between tasks, no just for

one specific task performance.

e-Business impact on Value Chain and Value System

New Business
Models

Infrastructure

HR Management

Technology, I+D

ERP, Knowleadge
Management
Intranet,
Documental
Management.

Virtual
Organization

Teleworking

B2E

Fragmentation
Business Process

E - Recruitment

E -Learning

Collaborative design

SCM,
PRM
Compras

SCM

B2B: E - Procurement ,
e-Sourcing , E - Marketplace ,
Extranet , EDI. EDI - web

Automaded
Manufactoring

B2B: E -Procurement ,
e- Sourcing , E -Marketplace ,
Extranet , EDI. EDI -web

E -Fullfilment
Virtual Shop:
B2C, C2C, C2B,

CAD/CAM

E - Marketing: viral,
Custumization

Order
Tracking

E -CRM y CRM

Custumer

ERP, Knoleadge Management, Intranet, Documents Management

Internal Logistics

Production

External Logistics

Marketing and Sales

Tecnical Assistence

BENCHMARKING

Definition: analytical process that measure own company

performance compared with best in the class companies.
Propose goals using external and objective standards
It is not just a number exercise
Goals must be quantitative
It is important to understand the process to achieve goals, not just
to set comparable or better goals than the best in the class
Real objective: valuable learning
Benchmarking is learning from others, from the best

BENCHMARKING: seven milestones

In which activity to benchmark

Key factors to measure
Identify best in the class companies
To measure the performance of the best in the class (why and
how the achieve the best results)
To measure own organisation performance and to compare it
with best in the class

Action plan for equalling or improving the model

Plan implementation and results monitoring

FINANTIAL RATIOS
Analysis of company performance as function of accounts evolution

Liquidity ratios (short term)

Financial leverage ratios (medium and long term)
Asset turnover ratios (how efficiently assets are used)
Profitability ratios
Market value ratios

INTELLECTUAL CAPITAL CONCEPT

Definition: intangible assets that although they are not reflected

in the accounts, give value to the company.
It makes the different between market value and books value

Euroforum 1998 definition: group of assets that even not reflected

in the formal accounts, generate or will generate value to the
company in the future.
An study on share value of 300 companies in New York stock
over 1954-1993 showed market value 2,8 times books value.

INTELLECTUAL CAPITAL BLOCKS

HUMAN CAPITAL

It refers to people and teams knowledge and their ability to

generate it (learning)

It is the base for the other two intellectual capital blocks

It does not belong to the company, it can not be bought, just

rented during a period of time

ESTRUCTURAL CAPITAL

It is the knowledge the organisation is able to make explicit,

to systematise, and to internalise. It can be latent in the
people and the teams.

RELATIONSHIPS CAPITAL

It refers to the value for the company of all its external

relations: customers, suppliers, partners

HUMAN CAPITAL

People satisfaction
People typology
People skills
Leadership
Team work
Stability, risk of loss
Skills improvement
People and teams innovativeness.

ORGANISATIONAL CAPITAL

Organisational culture

Business philosophy
Organisation structure
Strategic thinking process
Intellectual property
Process technology
Product technology
Support process
Knowledge capture process
Information technology
Internal communication system
Innovation process

RELATIONSHIPS CAPITAL

Relevant customers data bases

Customers loyalty
Customers relationship intensity
Customers satisfaction
Customer service and support
Proximity to the market
Brand awareness
Company reputation and positioning
Strategic alliances
Suppliers relationships

Other agents relationships: council, administration, press

Corporate Strategy

STRATEGIC ANALYSIS SUMMARY. SWOT ANALYSIS

SWOT (StrengthsWeaknesses-OpportunitiesThreats). Strong and weak

points are showed, as well
as opportunities and threats
that company can find
around.

WEAKNESSES

THREATS

STRENGHTS

OPPORTUNITIES

Internal Analysis

External Analysis

 Stars: strong competitive

position (cash generation) with
high growth expectations
(investments). Self sufficient.
Cow: strong position, low
growth expectation. Cash
generators (investment for
others)
Questions marks: industry high
attractive, but company relative
position poor. Net cash
consumers. To select the ones
with potential for becoming
stars.
Dogs: cash neutral, financial
equilibrium. No future
expectations. To get rid of them

RELATIVE MARKET SHARE

BCG MATRIX different business are located, represented by

circles, whose area is proportional to its importance.

?
% MARKET GROWTH

McKinsey MATRIX nine different strategic positions.

Industries Attractive

Low

Medium

High

Low

Competitive Position

Squares 1: very strong

competitive position. Business
getting investments.
Squares 2: attractive position,
selective investment.
Squares 3: slightly favourable
position. Activity can be kept
(improvement with specific
development strategies)
Squares 4: weak positions. To
leave them (medium term),
harvest (short term)

Medium

High

Activity expansion. Ansoff Matrix (1976)

EXISTING

PRODUCT
MARKET

NEW

EXISTING

MARKET PENETRATION

PRODUCT DEVELOPMENT

NEW

MARKET DEVELOPMENT

DIVERSIFICATION

DIVERSIFICATION

Horizontal (not
horizontal
integration )

Vertical

Conglomerates

VERTICAL INTEGRATION
The company enters into activities related with its product cycle, becoming its own
supplier or customer
Backwards: it becomes its supplier
Forwards: it becomes its customer
It is a particular case of related diversification
Its looks for business self sufficiency
It gives own distribution channels and final customer selling
points
Transactional costs can be reduced and competitive position
improved

COMPANY ACTIVITY DEVELOPMENTS METHODS.

Growth strategies:

Internal growth: investment in the own company, new

production capacities.

External growth: acquisition, stockholding or control of

other companies

Development strategies:

expansion

diversification

internalisation

INTERNATIONALISATION STRATEGY

Corporate level or business level

Internal reasons: costs reduction, resources search, minimum
sufficient size, global risk decrease, use of spare skills and
resources
External reasons: industry life cycle, customer behaviour, legal
constraints, industry globalisation
Strategies: Exports, contractual systems, direct investment

EVALUATING INTERNATIONAL
GROWTH ALTERNATIVE
KEY QUESTION

REQUIREMENTS

What contribution can we make to the

international contest ?
Markets/Countries to go in ?

Mechanism of entrance to be selected ?

Environment and competitors

internationally active strategy analysis
Relevant external markets and its
evolution analysis
Analysis of the key factors and the
limiting factors for international
competitiveness

EXTERNAL GROWTH

Companies integration:

Pure merger

Merger by absorption or simple absorption

Merger with partial assets partial contribution

Stockholding

Absolute control: more than 80% of share capital

Majority control: more than 50% of share capital

Minority control: less than 50% of share capital

Internal reasons: costs reduction, resources search,

minimum sufficient size, global risk decrease, use of spare
skills and resources

Companies associations: without loosing their own legal entity,

using specific legal agreements UTEs in Spain .

STRATEGIC ALLIANCES. BUSINESS COOPERATION

Long term contracts for specific activities

Franchise: transfer brand or know how
Subcontracting
Joint venture: two independent companies create a new legal
entity for a specific business
Consortium: long-term contractual alliance between several
companies with a common organisation Corporate level or
business level

Competitive Strategy

Generic competitive strategies Michael Porter (1986)

Competitive Advantage

Industry
Segment

Market segmentation is just a

strategy of overall low cost
provider or differentiation
whose scope is a determined
market segment
By segmentation a buyers
group is selected, an specific
group can be better served.
Trapped in the middle risk

Competitive Field

Cost

Differentiation

Low Cost Leader

Product Differentiation

Specialization

COMPETITIVE STRATEGY: Costs competitive advantage

Developed from experience effect.

Costs based leadership is achieved when a company is able
to get same product than its competitors at lower cost

Case 1: higher margin at same selling price

Case 2: lower margin, still profit , competitors margin zero

COMPETITIVE STRATEGY:
Competitive advantage by differentiation
Differentiation: customers perception gives a unique value to the
product or service base on differences with others.
Competitive advantage: differentiation makes possible for a
customer to pay more for a product or service (intrinsically
comparable)

COMPETITIVE STRATEGY:
DIFFERENTIATION THE COMPETITIVE ADVANTAGE

Brand image: Mercedes, Lexus, BMW, Harley Davidson

Technological innovation: Siemens
Business concept innovation: Starbucks
Business process innovation: Dell
Design innovation: Apple, Sony, BMW
Quality: BMW, Harley Davidson
Unique experiences: Ferrari, Starbucks,
Customer service: Corte Ingls, Singapore airlines
Distributors service: Harley Davidson
Distribution network: Caterpillar, Lexus

Company values: The Body Shop

COMPETITIVE STRATEGY: DIFFERENTIATION

the intangible factor

Intangible factors: social, psychological, esthetical

characteristics.
Shocking emotions: driving a Ferrari, nouvelle cuisine

Memorable experience: cookie and coffee at Starbucks

COMPETITIVE STRATEGY: Specialization or focusing

To define a reduced competitive field in a industry

To select a segment or group of segments and to define a

competitive strategy for it.
Added value for specific customers segments, working in market
niches that competitors are not servicing or are unknown to them.
Strategic options:

Focused Low Cost Provider: the lowest cost in a segment

Focused Differentiation: differentiation in a market

segment. Technological innovation: Siemens

COMPETITIVE STRATEGY:
Are low cost provider and differentiation strategies compatible ?
For Porter they were mutually exclusive
In the late 80s some companies were at the same time low
costs providers and differentiated: Toyota, Wall Mart and
they were successful
It has been proved as a very powerful strategy to develop
both generic strategies.

Digital Strategy CRM concept

CRM

CRM appeared in late 90s, when ERPs systems started their

development
Now is not possible to distinguish conceptually CRM and e
CRM
CRM is a tool that develops a competitive strategy, it is not
just a software.

CRM PHILOSOPHY

CRM is a tool for the implementation of a strategy based on

the close knowledge of the customer

CRMs OBJECTIVES
Maximize customer relationship profitability

To make available and to distribute internally the right

historical information about customers, market and business
evolution
Information analysis using specific tools to deeper know the
customer, its values and its needs.
Increase efficiency and profitability of commercial and
communications.
To manage customer relationship through all channels.

Actions coordination at all organisation levels using all

available channels
Brand commercial and communications actions monitoring
and feed back.

RELATIONAL MARKETING

Definition: commercial managament system that identifies

customers, stablishes lasting relationships with them, creating ties
with advantages for both sides
Key areas:

To create, maintain and to manage a good customer data

base

To design and to coordinate a right communication with the

customers

To promote actions to detect and to recover unsatisfied

customers

To organise special events or programs

To create specific fidelity programs for encourage and to

reward the repetitive purchase.

RELATIONAL MARKETING II

Loyalty connectors:

Repetitive sales option

Customer acquisition costs

Crossed sales option

Relevancy of positive references

Customers price sensibility

Commercial costs savings

Differential generated value

Additional business given by fidelity program members

Actual life > average life

To make average life longer and to reduce churn rate: early

detection of unhappy customers.

Strategy
evaluation and selection

RATIONAL DECISION PROCESS

Expected results :

Profitability analysis: pay back, disccounted cash flow (NCF,

n
n
MFi
IRR)
0 VAN MFi i

i
i 1 1 TIR
i 1 1 k
Cost Profit analysis

Shareholders value

Taken risk

Financial ratios projections

Sensibility analysis

Simulation models

Stakeholders reactions (shareholders, customers,

Unions, suppliers, banks, local community )

Strategy implementation

STRATEGY IMPLEMENTATION

Definition: activities and decisions needed for making effective or

placing into operation a strategy
Traditionally strategy formulation was considered more important
than strategy implementation. Nowadays both are similar
Implementation factors:

Very time demanding

Task and activities definition

Employees skills

Uncontrollable field factors (PEST)

Management leadership

Close monitoring

7 S MODEL

It integrates the relevant factors for strategic success. Good designed strategies can
fail if not all seven factors are considered.

STRATEGY IMPLEMENTATION: Basic activities

Organisation design: definition of a structure coherent with the

strategy
Human factor: management an leadership styles

Business culture: set of values and believes of the company that

make implementation easier or that creates invisible barriers.
Support administration systems: planning and control,
information systems.

BUSINESS STRUCTURE AND STRATEGY

Structure role in strategy success

Strategy is a factor that conditions structure

Basic hypothesis: structure follows strategy
Depending on kinds and periods of growing strategies, there
are predominant structures
Structural changes that follows strategic change is not
immediate
Diversification increase requires different structures.

Coherency between strategy and structure is a key factor.

ORGANIZATIONAL CULTURE
It can make strategy implementation easier, if both are coherent, or to delay it..

Business culture is a group of standards, values and ways of

thinking that are inherent to employees at all level, as well as
to the company image.
Culture is implicit, invisible and informal (it reflects
employees behaviour)
It increases behaviour consistency, strong culture gets
homogeneity
Coordination mechanism, it standardizes behaviours.

Strong culture not always makes strategy implementation

easier.

Balance Scorecard

BALANCED SCORECARD DEFINITION

Model that translates strategy in business that improve the

performance and the organisation behaviour.
The instruments are the organisation performance
indicators.

WHAT IS BSC ?
A model that integrates financial and non financial indicators.

System of financial and non financial indicators whose

objective is to measure organisation results.
Kaplan and Norton started their research in 1990, fully
convinced that financial indicators based models were
obsolete
Book The Balanced Scorecard
Model integrates financial indicators (the past) and non
financials (the future) ant it integrate them in a scheme that
allows the understanding of their elements interdependency
as well as the coherency with company vision and strategy

BSC global framework

Financial Perspective
Cause-effect
Sustained value
for shareholders

Productivity

Revenue growth

Defines the logical chain where intangible

assets become tangible values

Custumer Perspective
Products / Service Attributes

Price

Quality

Relation

Time

Function

Awareness

Brand

Brand

Value proposition for the

customer
Clarifies the condition that will create value
for the customer

Internal Process Perspective

Value Creation Process
Operations
Management

Custumers
Management

Innovation
Management

Regulators and social

Process Management

Defines the process that will change the

intagible assets into financial results and
for custumers

Learning and Growth Perspective

Assets and activities grouping

Human Capital

Information
Capital

Organization Capital

Define intangible assets aligned and

integrated to create value

BSC Relation driver-output and perspectives.

BSC moves Vision and Mission into operational
terms

La /
Vision
visi Strategy
n/Estrategia

Perspectiva Financiera

Financial Perspective

Para tener xito, qu imagen

To succeed,
which
image
debo
dar a mis
accionistas
should I give to my share
holders?

Perspectiva
de Clientes
Client Perspective
Para
lograrmy
mivision,
visi n,
qu
To reach
which
imagen
debo
dari a
mitoclientes?
image
should
give
my
customer?

Perspectiva
de Procesos
Process Perspective
Para satisfacer
mis clientes,
To achieve a
customers
en qu
procesos
debo
conseguir
satisfaction,
which
process
la excelencia?
should
be improved?

Perspectiva
de Personas
People Perspective
ParaTolograr
n,what
qumy
debe
reach mi
my visi
vision,
aprender,
y en qu
debe
company should
learn
and
develop?
desarrollarse
mi organizaci n?

CUSTOMERS PERSPECTIVE

Its aim is to identify targets related with customers that improve

company competitive capacity
Driver targets are the set of product/service values offered to the
customers (indicating company image and reputation, customer
relationship quality, product/service attributes)
Output targets refers to the derived consequences from how
adequate was the offer to customer expectations. Examples are:
MS, loyalty level, customers satisfaction )

Driver and output concepts are also applicable to perspectives:

e.g. customers perspective is the driver of financial perspective.

Output
(effect)

Driver
(cause)

PROCESSES PERSPECTIVE

It analyses if internal processes allow customer satisfaction

achieving high financial performance.
Business perspective for analysing internal processes and
predetermination of key processes trough value chain
Types:
Innovation processes: difficult to measure: % of new
products, % patented products, new products launched
compared with competitors
Operations processes: quality analysis and rengineering.
Indicators referred to costs, quality, times, process flexibility
Customer processes: customer service, after sale service,
technical assistance
Regulations and social process

GROWTH AND LEARNING PERSPECTIVE

It analyses company skill for improving and learning.

The value of this block are the drivers for the other perspectives
These drivers make the intangible assets that gives the
organisation the skill for improving and learning

Classic accounting approach to training as an expense and not

and investment is criticized
This is the less developed perspective, due to the low companies
advance in this matter
The model contribution is relevant, as defines the way for
improvement and it structures this perspective

GROWTH AND LEARNING PERSPECTIVE: Related Assets

Human Capital: people ability and skills (employees

managements). Indicators: employees satisfaction, productivity,
training needs
Information Capital: information systems (system that
provide useful information for the work) Indicators: strategic
data bases, own developed software, patents, copyright
Organizational Capital: Culture, Environment, Motivation for
learning. Indicators: people and teams initiatives, ability for team
work, company vision alignment.

ORGANIZATIONAL CULTURE
It can make strategy implementation easier, if both are coherent, or to delay it..

Business culture is a group of standards, values and ways of

thinking that are inherent to employees at all level, as well as
to the company image.
Culture is implicit, invisible and informal (it reflects
employees behaviour)
It increases behaviour consistency, strong culture gets
homogeneity
Coordination mechanism, it standardizes behaviours.

Strong culture not always makes strategy implementation

easier.

BSC methodology. Example

BSC
Strategic Objectives
Financial Perspective
Profitability increase
Turnover increase
Cost reduction
Customers Perspective
Customers capture
Customers loyalty
Customers satisfaction
Brand awareness
Processes Perspective
Product innovation

Environmental compromise
reduce solid wastes dumping
Reduce purchasing costs and
warehousing
Personalise customer relationship
Learning and Growth Perspective
Customer oriented culture creation

Excellent work atmosphere

Excellent information systems

Knowledge management

Leadership oriented to people and

customers

Indicators

Action Plan
Initiatives

2010

Goals
2011

2012

10%
20%
10%

12%
25%
10%

15%
27%
10%

New customers number

% loyal customers
Satisfaction level (survey)
Claims number
SOV

10000
80%
67%
950
75%

12000
82%
70%
850
77%

15000
85%
75%
700
80%

Number of new successful

products

10

Number of wastes tes

3,5

2,8

6
1
50000

6,5
1,5
60000

7
2
70000

% ROI increase
% sales increase
% costs reduction

% e purchases
% warehousing cost decrease
Number of personal
contacts with customers
Employees survey

Employees survey

60%

85%

70%

87%

Satisfaction survey to employees

Number on new systems
Employees sharing intranet content
Number of employees in intranet

55%
5
300
2500

60%
8
350
4000

360 evaluation and survey

80%

85%

Budget

I1: quarterly promotions

I2: loyalty program
I3 CRM call centre
I4 Quality program
I5: advertising campaign
(hiring XXX agency)

xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros

I6: IS improvement for

innovation management
I7: Contracts diversity
I8: waste management
company contract
I9: e market place partner
I10: Stock management
implantation
I11: CRM system new module

xxx Euros

85% I12: External consultants

Workshops
I13: CRM and customer
orientation program
90% I14: Salary policy based on
customers objectives
I15: Incentive trips for salesreps
I16: Succession program based
on competences and objectives
70% I3,I6, I9,I10,I11,I18,I19;I20
10 I17: ERP update
500 I18 Intranet networking
6000 I19: all employees on intranet
I20. documents management
system
95% I21: coaching for Managers

xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros
xxx Euros

INDICATORS (KPIs Key Performance Indicators)

They measure strategic objectives achievement

Financial measurement is traditional for organisation

success, levers value measurement is becoming more
relevant, they guarantee the success. Financial measurement
is the consequence of management.
Output indicators: results, they measure directly objectives
achievements
Drivers indicators: causes, they measure actions that facilitate
objectives achievement (indirect measurement of objective
achievement)

FINANCIAL PERSPECTIVE INDICATORS

Margin by customer.
Product rotation
Profit before taxes
Profit after taxes
ROE, ROI
Budget accuracy

Business culture is a group of standards, values and ways of

CUSTOMERS PERSPECTIVE INDICATORS

Customers rotation
Churn rate
Market share
Customer satisfaction
Claims number

PROCESSES PERSPECTIVE INDICATORS

Claims
Internal customers identification
Processes costs
Processes time
Productivity
Stocks management

LEARNING AND GROWTH INDICATORS

Innovation capacity
Training level
Improvements proposals
Functions delegation
Labour atmosphere

GOALS
They set what want to achieved in relation with the indicators

Indicators definition allows goals setting

Goals give the rate of the assumable strategic evolution and
change rate.

ACTION PLAN: The initiatives

Key importance for achieving proposed goals.

The initiatives are the planned actions for achieving the

strategic objectives
Some objectives can be achieved by drivers achievement

Strategic action is defined by the strategic initiatives

definition.
Initiatives move company to achieve goals, and
subsequently to company value creation

BSC strategic map example.

Client Perspective

Increase
Customer

Process Perspective

Process
innovation

Knowledge and
Development Perspective

Earnings
Increase

ROE
Increase

Financial Perspective

Customer
Oriented Culture

Customer
Loyalty

Customer
Satisfaction

Commercial
Relationships
Theorization

Excellent
working
place

Cost
reduction

Environment
preservation

Excellent
System
Information

Brand
Awareness

Procurement
and warehousing
processes

Knowledge
Management

Customer
oriented
management

BSC BARRIERS

Difficult working atmosphere

Inadequate culture
Lack of leadership
Difficult to get measures
Lack of Directors support
IT project (BSC is strategy, not technology)
homogeneity
Coordination mechanism, it standardizes behaviours.
Strong culture not always makes strategy implementation
easier.

MARKETING PLAN CONTROL

Primite Sales - 2007

Dry White Gypsum Sales - 2007

2.13 kt

1.24 kt A vs 1.92 kt B

4,0
2,5

3,5

2,0
Dry Sales kt/month

2,5
2,0
1,5
1,0

1,5
1,0

0,5

0,5

Primite Sales

YTD Av

Dec

Nov

Oct

Sept

Aug

July

June

May

Apr

Mar

Jan

White Gypsum Sales (dry)

Budget

Budget

TK RG : FPP Ratio - 2007

Umbogintwini Gypsum Sales : Disposal Ratio - 2007

0,0

YTD Av

Dec

Nov

Oct

Sept

Aug

July

June

May

Apr

Mar

Feb

Jan

0,0

Feb

Sales
kt/month

3,0

8.8 t/t A vs 9.5 t/t B

12

10

RG : FPP Ratio

100
80
60
40

20
2

Dec

Nov

Oct

Sept
Budget

YTD Av

RG/FPP

Aug

July

June

May

Apr

Mar

Feb

YTD Av

Dec

Nov

Oct

Sept
Budget

0
Jan

Sales : Disposal Ratio

Aug

July

June

May

Apr

Mar

Feb

0
Jan

Sales : Disposal Ratio %

120

MARKETING PLAN CONTROL

KPI's (Key Performance Indicators)

Net Materials Costs - MTH Variances ($k)
-500

-400

-300

-200

-100

100

Net Materials Costs / te Primite

200

160

300

-451

Site 1

140

-351

120

Site 3

Cost / te ($)

Site 2

-209

Site 4

Site 5

36,0

Site 6

60

20

204

Better Than Budget ->

95

96

97

-400

400

800

1200

98

99

00

01

1600

YTD

51,5 52,5

53,2

51,5

55,1
52,7

50,7

48,9

-498

Site 4

-3

40

% Sales

-123

Site 6

55,7
52,9

Site 3

Site 5

55,9

-770
50

Site 2

2000
60

Site 1

Sales : Disposal Ratio (dry weights)

Net Materials Costs - YTD Variances ($k)

-800

83,6

91,8

83
80

40

160

Site 7

100

299

30

20

625
10

Site 7

1946
0
Better Than Budget ->

95

96

97

98

99

00

01

YTD

MARKETING PLAN CONTROL

Primite Sales - 2007

Dry White Gypsum Sales - 2007

2.13 kt

1.24 kt A vs 1.92 kt B

4,0
2,5

3,5

2,0
Dry Sales kt/month

2,5
2,0
1,5
1,0

1,5
1,0

0,5

0,5

Nov
Nov

YTD Av

Oct
Oct

Dec

Sept

White Gypsum Sales (dry)

Budget

Aug

July

June

May

Apr

Mar

Jan

YTD Av

Dec

Nov

Oct

0,0

Sept

Primite Sales

Sept

Aug

July

June

May

Apr

Mar

Feb

Jan

0,0

Feb

Sales
kt/month

3,0

Budget

Umbogintwini Gypsum Sales : Disposal Ratio - 2007

TK RG : FPP Ratio - 2007

4
12

100

10
RG : FPP Ratio

80
60
40

8
6
4

20
2

Budget

Dec

YTD Av

RG/FPP

Aug

July

June

May

Apr

Mar

Jan

YTD Av

Dec

Nov

Oct

Sept
Budget

0
Feb

Sales : Disposal Ratio

Aug

July

June

May

Apr

Mar

Feb

0
Jan

Sales : Disposal Ratio %

8.8 t/t A vs 9.5 t/t B

120

MARKETING PLAN CONTROL

KPI's (Key Performance Indicators)

Net Materials Costs - MTH Variances ($k)
-500

-400

-300

-200

-100

100

Net Materials Costs / te Primite

200

160

300

-451

Site 1

140

-351

120

Site 3

Cost / te ($)

Site 2

-209

Site 4

Site 5

36,0

Site 6

60

20

204

Better Than Budget ->

95

96

97

-400

400

800

1200

98

99

00

01

1600

YTD

51,5 52,5

53,2

51,5

55,1
52,7

50,7

48,9

-498

Site 4

-3

40

% Sales

-123

Site 6

55,7
52,9

Site 3

Site 5

55,9

-770
50

Site 2

2000
60

Site 1

Sales : Disposal Ratio (dry weights)

Net Materials Costs - YTD Variances ($k)

-800

83,6

91,8

83
80

40

160

Site 7

100

299

30

20

625
10

Site 7

1946
0
Better Than Budget ->

95

96

97

98

99

00

01

YTD

Analytical accounting. Costs concept

BASIC DEFINITIONS

Cost : one of the most widely used words in economics language, but not always
with the same

Cost definition: measure in monetary terms of the needed resources in order to

achieve an objective.

Historical cost: measure in monetary terms of the used resources for achieving an
objective already got.

Expected cost: a priori calculated cost for achieving a proposed objective. Also
called replacement cost

DIRECT AND INDIRECT COSTS

Reference unit: costs related to product, product line, department,

organizational unit

Direct costs: of the reference unit, unequivocally identified with it.

Indirect costs: of the reference unit, they are shared with other units or they
are common to several of them. They are also called allocated costs or
shared costs. Allocation criteria: for each unit, the cost that the company
would save if the unit did not exist. Cost : one of the most widely used

words in economics language, but not always with the same

FIXED AND VARIABLE COSTS

Distinction based on activity volume

Fixed cost: it does not change with activity volume

Variable cost: it varies proportionally to activity level.

Production workforce: it can be a fixed cost or a variable cost depending on

particular circumstances. If free dismissal is an option, it would be variable. If

this is not the case, and the company stay with all workforce even during low
activities periods, it would be fixed.

Semi variable cost: it can be split in a variable part and a fixed part.

Semi fixed costs: they do not change in a range, but they can change
dramatically out of this range.

Unitary fixed costs: they are variable, decreasing with the number of
produced units.

Unitary variable costs: they are fixed.

ABC COST ACCOUNTING (Activity based costs)

Cost drivers: factors that make costs to change

Number of machinery conditioning operations
Number of machinery conditioning hours
Number of times goods handling
Number of different pieces in each product
Number of production orders
Number of expeditions

Number of receptions
Number of processed orders to suppliers
Number of received orders from customers
Number of customers

STANDARD COSTS

Definition: predetermined value for a cost, believed to be the average

cost, they should be the incurred cost for manufacturing a product unit
under normal conditions. It is also a target cost.

Uses

Expected cost for taking decision

Reference target value
Base for stock valuation

COSTS BASED DECISIONS

Operations decisions: immediate term decisions, effects on a short

period (one year maximum), because decision itself or because it can
be rectified.

Investment decisions: their consequences last for a long term period

(conventionally more then one year).

Differential costs: those different for every alternative decision

Unalterable costs: they are the same for every alternative decision

MARGINS

Unitary contribution margin: selling price less all variable costs.

Gross margin: selling price less total manufacturing cost (sales and
administration costs excluded)

Profitability indicator for taking decisions:

Low usage of production capacity: contribution margin per unit of
product
Full usage of production capacity: contribution margin per unit of
capacity

Price Policy

PRICING BASIC CONCEPTS

MARKET: it is the field where buyers and sellers meet, their

contact is so close, that prices of a product in an area of the field
affect to prices in other areas. I
MARKET PRICE: the one that makes possible the sell of a
product.

INTRINSEC VALUE: cost

EXTRINSEC VALUE: that customer is ready to pay for satisfying
his needs.
CUSTOMER ANALYSIS VALUE: to remove attributes not valued
by the customer.

PRICE ELEMENTS

Payment terms: when and how.

Product placement.
Packaging
Discounts and special offers

Guarantee and/or Technical Assistance.

MARKET ELEMENTS

Demand = f (needs, means (salary, credit access, other

incomes), selling price )
1st Offer & Demand Law:
P O= D
2nd Offer & Demand Law
P

and the opposite

ELASTICITY

Definition: function change as consequence of variable

change. (the slope of the tangent to the considered point)
E=

D%/

P%<0

E > 1 elastic and vice versa

E > 0 speculative purchases (gold, stock market)

unelasticity: brand loyalty

Learning curve and prices.

i) Profitability increase

ii) Cost translated to price.

Price
Price
Cost

Cost

C
Accumulated Volume

Break even point.

Period costs.
U
total number of produced units.
Cv
variable costs, depending proportionally to production
Cf
fixed cost, independent from production volume
Ct
total costs Cf+Cv
Unitary costs.
V
variable cost for each produced unit (fixed)
F
Cf / U (variable), U: total produced units, production volume
Profit & Loss Account
I
Turnover = P* x U
-(Variable Cost)
Mb
Contribution margin
-(Fixed Costs)
Tp
Trading Profit
Breakeven point : trading profit = 0
Um
I-Cv = Cf Contribution margin = Fixed costs
P x U - V x U = Cf
Ux [P - V]** = Cf
Um = Cf / P-V
*P = unitary price
**P-V = unitary contribution margin

Break even point and Price

1) U<Um
Quick actions in order to make U>Um. Price or other marketing mix elements,
depending on elasticity and market price.

2) U>Um
2.1 Spare production capacity
Opportunity cost = unitary variable cost (V)

Contribution increases directly P&L account.

2.2 Full production capacity

Opportunity cost = unitary variable cost (V) + unitary contribution margin (P-V).

For selling in a different market, price must be at least current one.

INCOTERMS
Group E
EXW

Ex Works

Group F
Main transport unpaid

FCA
FAS
FOB

Free Carrier
Free Alongside Ship
Free On Board

Group C
Main transport paid

CFR
CIF
CPT
CIP

Cost and Freight

Cost, Insurance and Freight
Carriage Paid To
Carriage and Insurance Paid To

DAF
DES
DEQ
DDU
DDP

Delivered At Frontier
Delivered Ex Ship
Delivered Ex Quay
Delivered Duty Unpaid
Delivered Duty Paid

Group D

Product Policy

COMPANY TECHNOLOGICAL KNOW HOW IDENTIFICATION

Technological know how self diagnosis

Production processes, design skills, operational procedures.

Incremental innovation vs. disruptive innovation

Technical specifications: a comparison gives relative position

Public

bodies:

www.csic.es,

www.cemitec.com

www.inasmet.es,

www.aice.es,

Idea
evaluation
Waste acid for
ballitic cement
Metals from
FeCl2
sales

Lagoon
solids
as opacifiers
(fertilisers)
Lower cost
landfill

WG/hemihydrate
as plastics filler

Alternative
sulphates

Ore& coke
recycle

Global review Gardening

red gypsum
products
Global review
iron salts

Rapid building
products
Combined
wastes

WAG
Market
Development
Sales Growth

Primite in
cement

WG for plasterboard RG floor

screed
Global review
acid outlets
Acid filtrates for
Iron oxides

Easy flow

WG

Opportunity
development Feasibility

plasterboard,
glue & ceramics
RG landscaping
Monohydrate
Scarlino
in europe
RG cement
Iron oxides
+WG ex RG
Iron mordants Gypsum for
for paper
embankment
stabilisation

Development
TG in
ceramics

Test
Marketing

Ferti bricks

Primite clinker
for cement

Primite bricks

White gypsum
expansion

Primite bricks

Salts
for organic
fertilisers

Launch
White gypsum
expansion for
plasterboard

New Business Development Pipeline-Stage gate view

Magnetic
plasterboard

SECTORIAL ASSOCIATIONS

They defend sector interests, they are consultant bodies for the
Administration, they publish annual report, they belong to
international associations.

CEFIC : European Chemical Industries www.cefic.be

Cement

Bureau

European

Cement

Producers

Advertising

Agencies

www.cembureau.be

American

Association

of

http://www2.aaaa.org/ . Unalterable costs: they are the same for

every alternative decision

Introduction to International Commerce

RIVALRY AMONGS COUNTRIES

Consequence of globalisation

Markets, technologies and investments

Government actions:
Subsidies and low interest rates for investments
Strong property rights
Good Public Administration
Technically active population

Expanding national market

CPI INDEX http://www.transparency.org

WORLD GINI COEFFICIENT INCOME DISTRIBUTION BY COUNTRY

GOVERMENT ROLE

Security provider
Contracts guarantee
Risk taking on
Macro economy management
Industrial policy definition

MACRO ECONOMY POLICY

Fiscal Policy : surplus, balanced, deficit (taxes, expenses

policy: expansive vs restrictive)
Monetary
treasury

Policy:
bonds.

interest
Monetary

rate,

reserves

policy

objective:

requirements,
to

finance

economical growth without inflation, keeping the adequate

reserves in foreign currency.

Incomes Policy: direct control on prices and salaries

(emergency situations, as Nixon in 71 )

MICRO ECONOMY POLICY

Commercial Policy : import duties, quotas, restrictive

agreements (GATT and Doha rounds)
FDI (Foreign Direct Investment): restriction or promotion
Nationalisation and privatisation: golden share
Economical

regulations:

transports,

telecommunications, financial services

Antitrust regulation
Subsidies provision

energy,

COUNTRY INFRAESTRUCTURES

Political
Economical: relative weight of consumption in terms of % of
GDP, investments, Public Administration and commerce.
Institutional: banking system, judicial system, police, army,
working force regulation, savings system, local administration,
Social Security system

RESOURCES DEVELOPMENT

Natural
Effective development
Natural environment preservation
Minimise waste generation
Human: quantity and quality (Indian case)
Technology: educational institutions, corporate research,
domestic development, absorption through FDI
Capital: if the consumption and the imports take all
available resources, there is not capital for growth.

CAPITAL ACCUMULATION ROUTES

Domestic banks loans: Asian countries, savings up to 40% of

GDP
Domestic stock market: USA
Deliberate external debt: Mexico, Brazil
Non deliberate external debt: Poland and India during 73 oil
crisis
Prstamo extranjero no intencionado. India, Polonia con la
crisis del crudo del 73.

EFFICIENT USE OF RESOURCES. PRODUCTIVITY

Foreign competitors: a channel to oblige to achieve

efficiency: BMW in South Africa was a revulsive for local
suppliers
Domestic competitors: Anti trust law
Competition for FDI: China: low salaries, tax exemptions,
huge domestic market
Administrative assignment : In Singapore, Administration

makes 25 % of GDP

GOVERNMENT FUNCTION

Security: internal (crime, Japanese yakuza, cultural and inter

religion clashes, terrorism) and external (India, Pakistan)
Legal System, Tax Collection, Judicial System
Extraordinary

risks

coverage:

environmental,

nuclear,

unemployment, heath insurance, retirement wages

Macro economy management: fiscal and monetary
Industrial Policy: as the result of its micro economical policy,
subsidies, import duties. Domestic conflicts risk, productivity
decrease

Internationalisation.
Semi Globalisation vs. Globalisation

TED LEVITT: MARKETS GLOBALISATION (1983)

Markets globalisation is close, international commercial world is

coming to the end, multinationals companies are going to
disappear.
Global companies act with a constant resolution they sell same
items same way all over

PANKAJ GEMAWHAT: Redefining Globalisation

Differences between countries are bigger than usually thought

Globalisation emphasises too much in international standardization

and scalar expansion

It is important to take advantage of countries similarities, but is also

worth to consider differences

SEMI GLOBALISATION

10 % ASSUMPTION

Telephone calls
Immigrants (in relation with total population)
Foreign students OCDE
Research in business management
Private donations
FDI
Tourists entrance
Patents
International investment in share market
Commerce (in relation with GDP)

%
Internalisation level
2,5
2,8
4,5
6,7
8,1
9,2
9,3
12,5
12,8
24,5

NEWTONS LAW IN INTERNATIONAL COMMERCE

The international commerce between customers is directly

proportional to their economical size (unilateral attribute) and
reversely proportional
(bilateral attribute)

physical distance between them

CAGE MODEL

Cultural distance

Administrative distance

Geographical distance

Economical distance

CULTURAL DISTANCE

Social attributes based on people interactions, highly idiosyncratic

Bilateral
Different languages
Ethnics differences, lack of ethnical or social connection networks
Different religions
Mistrust
Different values, standards and regulations

Unilateral
Narrow mind people
Traditionalism

ADMINISTRATIVE DISTANCE

Laws, policies, institutions, that typically arise from a political process,

conducted or imposed by the Governments, including international treaties.

Bilateral

Lack of colonial links

Non-existence of regional commercial common block

Non-existence of common currency

Political hostility

Unilateral

Out of the market or closed economy

National preference level

Not being member of international organizations

Weak institutions, corruption

GEOGRAPHICAL DISTANCE

Bilateral
Physical distance
Non-existence of a common border
Time difference
Climate differences and diseases environment

Unilateral
Geography without exit to the sea

Without fluvial navigation

Geographical size
Remote geography
Weak transport and communication networks

ECONOMICAL DISTANCE

Bilateral
Difference between wealthy and poor population (Gini index)
Natural resources quality and other costs differences
Financial resources
Human resources
Infrastructure
Information or knowledge

Unilateral
Economy size GDP
Low GNI Gross National Income per capita

CULTURAL DISADVANTAGES

Language, tradition

Idiosyncratic styles

Different designs

Different technical standards

Different packages and sizes

Different target segments

Deeply established habits for local products

ADMINISTRATIVE DISADVANTAGES

High Government implication

Regulations (health services )
Political notoriety
State property (infrastructures)
National symbols
National security

Natural patrimony (natural resources)

Multiple regulatory requirements

Size, notoriety

GEOGRAPHICAL DISADVANTAGES

High transport prices

Low value/weight or value/volume ratios
Transport difficult or dangerous
Perishable products

High local supervision needed

ECONOMICAL DISADVANTAGES

Cost disadvantages
Suppliers,

channels

or

business

disadvantages
Profitability weakening when expanding

systems

know

how

VALUE CREATION STRATEGIES

ADAPTATION: to adapt business to the differences between the

different countries.

AGGREGRATION: to overcome differences between countries

grouping them by their similarities and creating better scale
economies than the ones got by country adaptation.
ARBITRATION; it exploits the selected differences of the
different countries, it looks for the absolute economies more

than for the standardisation scale economies

ADAPTATION

Variation: Products, Policies, Repositioning, Statistics

Focusing: to reduce the need for variation

Products

Geographies

Vertical (value niches)

Segments

Externalisation: to reduce variation charge

Strategic alliances

Franchises

User adaptation

Design: to reduce variation cost: flexibility, division, platforms, modular design

Innovation: to improve variation effectiveness

Transfer

Localization: to concentrate innovation in a target geography

Combination: to merge original business elements with new contexts

To transform local environments ( Mc Donalds)

AGREGATION: REGIONAL STRATEGIES ARCHETYPES

Regional or national focus: Zara

Regional holdings: growth option, risk reduction

Regional hubs: resources shared by local operations

Regional platforms: cost distribution trough regions

Regional mandates: specialization trough regions

Regional networks; integration through regions

ARBITRATION

International strategy by definition: spices commerce

Big

political

sensibility,

specially

for

workforce,

fiscal

and

environmental

Cultural: French cuisine, American fast food, Jamaican reggae, Brazil

football

Administrative: fiscal

Geographic: Holland flowers, Chile fruit

Economical: work force, capital cost

Marketing function and organisation

MARKETING DEFINITIONS

AMA
Management process dealing with ideas, goods and services generation and
with the definition of the most adequate distribution, price and communication,
in such a way that the interchanges between an organisation and some
individuals are promoted, satisfying both parties objectives.

Martn Oar
Group of actions aiming to satisfy with the adequate products the demand
needs, in a profitable way for the business

R Glasser
Technique for consumer needs determination and satisfaction, maximising the
profitability of the business invested capital.

GENERIC MARKETING STRATEGIES

Low cost leader

Differentiation
Specialization
Blue Oceans

MARKETING DECISION VARIABLES

Controlled
Marketing Mix elements
Semi controlled (based on inter departmental relations)
Economic mission and strategic objectives
Financial and Human resources
Production capacity
Available technology
Uncontrollable

OPERATIONAL MARKETING VARIABLES

The 4 Ps

Product

Price

Placement

Distribution channels

Warehouses

Location

Transport

Promotion

Advertising

Special discounts and offers

Personal sales

Public relations

People

MARKETING PROFIT AND LOSS ACCOUNT IN 000 $

Sales Value

Example

Product A
Product B
Product C
Product D

1000
1200
600
400

Total Sales Value

3200

Variable cost

70

Distribution
Other selling expenses

310
50

Total Selling Expenses

360

Contribution

2770

Wages & SS
Fixed Costs
Direct Marketing Expenses
Allocated Marketing Expenses
Advertising & Promotions

160
40
1300
500
300

Total fixed cost

2300

Trading Profit

470

WEBs

http://www.youtube.com/watch?v=mmPRkoA97O4&feature=related Internet en 2050

http://www.ecb.int/stats/exchange/eurofxref/html/eurofxref-graph-usd.en.html
European Central Bank
http://es.youtube.com/watch?v=pFmYIFk5i1Q subprime crisis
http://epp.eurostat.ec.europa.eu/ Eurostat
https://www.cia.gov/library/publications/the-world-factbook/geos/pe.html World
facts
http://www.transparency.org Corruption index
http://www.nationmaster.com Gini index and Macroeconomic data
http://www.wto.org/indexsp.htm World Trade Organisation
http://www.investmenttools.com/ Dry Baltic Index, CRB Reuters
http://www.youtube.com/watch?v=mmPRkoA97O4&feature=related internet in 2050
http://www.smallerindiana.com/video/who-moved-my-cheese-video who moved my
cheese