Seminar 02 - Strategy Analysis Seminar 2 1 Why do we need...

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1 Strategy Analysis Strategy Analysis Seminar 2
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2 Why do we need strategy analysis? It allows the analyst to probe into the economics of the firm at a qualitative level qualitative level Allows the subsequent financial and accounting analysis to be grounded in business reality Analysis of current information can only be a guide to the a guide to the future performance future performance if the firm is stable, static and mature . Strategy analysis allows the anticipation of changes in the future. Thereby, it allows the analyst to examine the sustainability, environmental changes, managerial vision, M & A potential etc.
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3 Business Strategy Analysis why won’t the company’s products/services become a commodity priced at the marginal cost of production?
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4 Strategic determinants of firm value ( 3 3 Choices Choices ) 1. 1. Industry choice Industry choice and Industry analysis: The profitability of various industries varies systematically and predictably over time. Therefore, industry choice is important. 2. 2. Competitive positioning Competitive positioning : The manner in which the firm competes with other firms in its chosen industry 3. 3. Corporate strategy Corporate strategy : The manner in which the firm expects to create and exploit synergies across the range of businesses it operates in.
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5 Industry Analysis Industry Profitability Actual and Potential competition Bargaining power in input And output markets Degree of Rivalry Among Existing firms Ease of New entrants Availability of Substitute products Bargaining Power of Suppliers (input) Bargaining Power of Buyers (output)
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6 Degree of Rivalry Among Ease of Availability of Existing Firms New Entrants Substitute Products Industry growth scale economies relative price concentration first mover advantage relative performance differentiation distribution access buyers' willingness to switching costs legal barriers to switch scale/learning economies fixed/variable costs excess capacity PROFITABILITY Bargaining Power Bargaining Power of Buyers (output) of Suppliers (input) switching costs switching costs differentiation differentiation importance of cost/quality importance of cost/quality number of buyers number of supplier volume per buyer
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Seminar 02 - Strategy Analysis Seminar 2 1 Why do we need...

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