The term ‘Value Chain’ was used by Michael Porter in his book "Competitive Advantage: Creating and Sustaining superior Performance" (1985). The value chain analysis describes the activities the organization performs and links them to the organizations competitive position.
Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular
activity adds to the organizations products or services. This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money.
Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage.
Porter distinguishes between primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service. They can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary activities is linked to support activities which help to improve their effectiveness or efficiency.
There are four main areas of support activities: procurement, technology development (including R&D), human resource management, and infrastructure (systems for planning, finance, quality, information management etc.).
The term 'Margin' implies that organizations realize a profit margin that depends on their ability to manage the linkages between all activities in the value chain. In other words, the organization is able to deliver a product / service for which the customer is willing to pay more than the sum of the costs of all activities in the value chain.
The linkages are flows of information, goods and services, as well as systems and processes for adjusting activities. Their importance is best illustrated with some simple examples:
Only if the Marketing & Sales function delivers sales forecasts for the next period to all other departments in time and in reliable accuracy, procurement will be able to order the necessary material for the
correct date. And only if procurement does a good job and forwards order information to inbound logistics, only than operations will be able to schedule production in a way that guarantees the delivery of products in a timely and effective manner – as pre-determined by marketing.
In the result, the linkages are about seamless cooperation and information flow between the value chain activities.
In most industries, it is rather unusual that a single company performs all activities from product design, production of components, and final assembly to delivery to the final user by itself. Most often, organizations are elements of a value system or supply chain. Hence, value chain analysis should cover the whole value system in which the organization operates.
Within the whole value system, there is only a certain value of profit margin available. This is the difference of the final price the customer pays and the sum of all costs incurred with the production and delivery of the product/service (e.g. raw material, energy etc.). It depends on the structure of the value system, how this margin spreads across the suppliers, producers, distributors, customers, and other
elements of the value system. Each member of the system will use its market position and negotiating power to get a higher proportion of this margin. Nevertheless, members of a value system can cooperate to improve their efficiency and to reduce their costs in order to achieve a higher total margin to the benefit of all of them (e.g. by reducing stocks in a Just-In-Time system).
A typical value chain analysis can be performed in the following steps:
1. Analysis of own value chain – which costs are related to every single activity
2. Analysis of customers value chains – how does our product fit into their value chain
3. Identification of potential cost advantages in comparison with competitors
4. Identification of potential value added for the customer – how can our product add value to the customers value chain (e.g. lower costs or higher performance) – where does the customer see such potential Organizations Value.
Sunday, April 15, 2012
Monday, October 17, 2011
Leadership Models
Leadership models help us to understand what makes leaders act the way they do. The ideal is not to lock yourself in to a type of behavior discussed in the model, but to realize that every situation calls for a different approach or behavior to be taken. Two models will be discussed, the Four Framework Approach and the Managerial Grid.
Four Framework Approach
In the Four Framework Approach, Bolman and Deal (1991) suggest that leaders display leadership behaviors in one of four types of frameworks: Structural, Human Resource, Political, or Symbolic.
This model suggests that leaders can be put into one of these four categories and there are times when one approach is appropriate and times when it would not be. That is, any style can be effective or ineffective, depending upon the situation. Relying on only one of these approaches would be inadequate, thus we should strive to be conscious of all four approaches, and not just depend on one or two. For example, during a major organization change, a Structural leadership style may be more effective than a Symbolic leadership style; during a period when strong growth is needed, the Symbolic approach may be better. We also need to understand ourselves as each of us tends to have a preferred approach. We need to be conscious of this at all times and be aware of the limitations of just favoring one approach.
Structural Framework
In an effective leadership situation, the leader is a social architect whose leadership style is analysis and design. While in an ineffective leadership situation, the leader is a petty tyrant whose leadership style is details. Structural Leaders focus on structure, strategy, environment, implementation, experimentation, and adaptation.
Human Resource Framework
In an effective leadership situation, the leader is a catalyst and servant whose leadership style is support, advocating, and empowerment. while in an ineffective leadership situation, the leader is a pushover, whose leadership style is abdication and fraud. Human Resource Leaders believe in people and communicate that belief; they are visible and accessible; they empower, increase participation, support, share information, and move decision making down into the organization.
Political Framework
In an effective leadership situation, the leader is an advocate, whose leadership style is coalition and building. While in an ineffective leadership situation, the leader is a hustler, whose leadership style is manipulation. Political leaders clarify what they want and what they can get; they assess the distribution of power and interests; they build linkages to other stakeholders, use persuasion first, then use negotiation and coercion only if necessary.
Symbolic Framework
In an effective leadership situation, the leader is a prophet, whose leadership style is inspiration. While in an ineffective leadership situation, the leader is a fanatic or fool, whose leadership style is smoke and mirrors. Symbolic leaders view organizations as a stage or theater to play certain roles and give impressions; these leaders use symbols to capture attention; they try to frame experience by providing plausible interpretations of experiences; they discover and communicate a vision.
Managerial Grid
The Blake and Mouton Managerial Grid, also known as the Leadership Grid (1985) uses two axis:
1."Concern for people" is plotted using the vertical axis
2."Concern for task or results" is plotted along the horizontal axis.
They both have a range of 0 to 9. The notion that just two dimensions can describe a managerial behavior has the attraction of simplicity. These two dimensions can be drawn as a graph or grid:
Most people fall somewhere near the middle of the two axis — Middle of the Road. But, by going to the extremes, that is, people who score on the far end of the scales, we come up with four types of leaders:
◦Authoritarian — strong on tasks, weak on people skills
◦Country Club — strong on people skills, weak on tasks
◦Impoverished — weak on tasks, weak on people skills
◦Team Leader — strong on tasks, strong on people skills
The goal is to be at least in the Middle of the Road but preferably a Team Leader — that is, to score at least between a 5,5 to 9,9. In addition, a good leader operates at the extreme ends of the two scales, depending upon the situation.
Authoritarian Leader (high task, low relationship)
Leaders who get this rating are very much task oriented and are hard on their workers (autocratic). There is little or no allowance for cooperation or collaboration. Heavily task oriented people display these characteristics: they are very strong on schedules; they expect people to do what they are told without question or debate; when something goes wrong they tend to focus on who is to blame rather than concentrate on exactly what is wrong and how to prevent it; they are intolerant of what they see as dissent (it may just be someone's creativity), so it is difficult for their subordinates to contribute or develop.
Team Leader (high task, high relationship)
These leaders lead by positive example and endeavor to foster a team environment in that all team members can reach their highest potential, both as team members and as people. They encourage the team to reach team goals as effectively as possible, while also working tirelessly to strengthen the bonds among the various members. They normally form and lead some of the most productive teams.
Country Club Leader (low task, high relationship)
These leaders predominantly use reward power to maintain discipline and to encourage the team to accomplish its goals. Conversely, they are almost incapable of employing the more punitive coercive and legitimate powers. This inability results from fear that using such powers could jeopardize relationships with the other team members.
Impoverished Leader (low task, low relationship)
These leaders use a “delegate and disappear” management style. Since they are not committed to either task accomplishment or maintenance; they essentially allow their team to do whatever it wishes and prefer to detach themselves from the team process by allowing the team to suffer from a series of power struggles.
The most desirable place for a leader to be along the two axes at most times would be a 9 on task and a 9 on people — the Team Leader. However, do not entirely dismiss the other three. Certain situations might call for one of the other three to be used at times. For example, by playing the Impoverished Leader, you allow your team to gain self-reliance. Be an Authoritarian Leader to instill a sense of discipline in an unmotivated worker. By carefully studying the situation and the forces affecting it, you will know at what points along the axes you need to be in order to achieve the desired result.
Four Framework Approach
In the Four Framework Approach, Bolman and Deal (1991) suggest that leaders display leadership behaviors in one of four types of frameworks: Structural, Human Resource, Political, or Symbolic.
This model suggests that leaders can be put into one of these four categories and there are times when one approach is appropriate and times when it would not be. That is, any style can be effective or ineffective, depending upon the situation. Relying on only one of these approaches would be inadequate, thus we should strive to be conscious of all four approaches, and not just depend on one or two. For example, during a major organization change, a Structural leadership style may be more effective than a Symbolic leadership style; during a period when strong growth is needed, the Symbolic approach may be better. We also need to understand ourselves as each of us tends to have a preferred approach. We need to be conscious of this at all times and be aware of the limitations of just favoring one approach.
Structural Framework
In an effective leadership situation, the leader is a social architect whose leadership style is analysis and design. While in an ineffective leadership situation, the leader is a petty tyrant whose leadership style is details. Structural Leaders focus on structure, strategy, environment, implementation, experimentation, and adaptation.
Human Resource Framework
In an effective leadership situation, the leader is a catalyst and servant whose leadership style is support, advocating, and empowerment. while in an ineffective leadership situation, the leader is a pushover, whose leadership style is abdication and fraud. Human Resource Leaders believe in people and communicate that belief; they are visible and accessible; they empower, increase participation, support, share information, and move decision making down into the organization.
Political Framework
In an effective leadership situation, the leader is an advocate, whose leadership style is coalition and building. While in an ineffective leadership situation, the leader is a hustler, whose leadership style is manipulation. Political leaders clarify what they want and what they can get; they assess the distribution of power and interests; they build linkages to other stakeholders, use persuasion first, then use negotiation and coercion only if necessary.
Symbolic Framework
In an effective leadership situation, the leader is a prophet, whose leadership style is inspiration. While in an ineffective leadership situation, the leader is a fanatic or fool, whose leadership style is smoke and mirrors. Symbolic leaders view organizations as a stage or theater to play certain roles and give impressions; these leaders use symbols to capture attention; they try to frame experience by providing plausible interpretations of experiences; they discover and communicate a vision.
Managerial Grid
The Blake and Mouton Managerial Grid, also known as the Leadership Grid (1985) uses two axis:
1."Concern for people" is plotted using the vertical axis
2."Concern for task or results" is plotted along the horizontal axis.
They both have a range of 0 to 9. The notion that just two dimensions can describe a managerial behavior has the attraction of simplicity. These two dimensions can be drawn as a graph or grid:
Most people fall somewhere near the middle of the two axis — Middle of the Road. But, by going to the extremes, that is, people who score on the far end of the scales, we come up with four types of leaders:
◦Authoritarian — strong on tasks, weak on people skills
◦Country Club — strong on people skills, weak on tasks
◦Impoverished — weak on tasks, weak on people skills
◦Team Leader — strong on tasks, strong on people skills
The goal is to be at least in the Middle of the Road but preferably a Team Leader — that is, to score at least between a 5,5 to 9,9. In addition, a good leader operates at the extreme ends of the two scales, depending upon the situation.
Authoritarian Leader (high task, low relationship)
Leaders who get this rating are very much task oriented and are hard on their workers (autocratic). There is little or no allowance for cooperation or collaboration. Heavily task oriented people display these characteristics: they are very strong on schedules; they expect people to do what they are told without question or debate; when something goes wrong they tend to focus on who is to blame rather than concentrate on exactly what is wrong and how to prevent it; they are intolerant of what they see as dissent (it may just be someone's creativity), so it is difficult for their subordinates to contribute or develop.
Team Leader (high task, high relationship)
These leaders lead by positive example and endeavor to foster a team environment in that all team members can reach their highest potential, both as team members and as people. They encourage the team to reach team goals as effectively as possible, while also working tirelessly to strengthen the bonds among the various members. They normally form and lead some of the most productive teams.
Country Club Leader (low task, high relationship)
These leaders predominantly use reward power to maintain discipline and to encourage the team to accomplish its goals. Conversely, they are almost incapable of employing the more punitive coercive and legitimate powers. This inability results from fear that using such powers could jeopardize relationships with the other team members.
Impoverished Leader (low task, low relationship)
These leaders use a “delegate and disappear” management style. Since they are not committed to either task accomplishment or maintenance; they essentially allow their team to do whatever it wishes and prefer to detach themselves from the team process by allowing the team to suffer from a series of power struggles.
The most desirable place for a leader to be along the two axes at most times would be a 9 on task and a 9 on people — the Team Leader. However, do not entirely dismiss the other three. Certain situations might call for one of the other three to be used at times. For example, by playing the Impoverished Leader, you allow your team to gain self-reliance. Be an Authoritarian Leader to instill a sense of discipline in an unmotivated worker. By carefully studying the situation and the forces affecting it, you will know at what points along the axes you need to be in order to achieve the desired result.
Tuesday, October 4, 2011
Concepts of Leadership
Concepts of Leadership
Good leaders are made not born. Good and effective leaders develop through a never ending process of self-study, education, training, and experience. In order to inspire others into higher levels of teamwork, there are certain things you must be, know, and, do. These do not come naturally, but are acquired through continual work and study. Good leaders are continually working and studying to improve their leadership skills; they are NOT resting on their laurels.
What is leadership?
Leadership is a process by which a person influences others to accomplish an objective and directs the organization in a way that makes it more cohesive and coherent. Leadership is a process whereby an individual influences a group of individuals to achieve a common goal.
Leaders carry out leadership process by applying their leadership knowledge and skills (Process Leadership). Actions of leaders are influence by the traits they possessed (Traits Leadership).
While leadership is learned, the skills and knowledge processed by the leader can be influenced by his or hers attributes or traits, such as beliefs, values, ethics, and character. Knowledge and skills contribute directly to the process of leadership, while the other attributes give the leader certain characteristics that make him or her unique.
Skills, knowledge, and attributes make the Leader.
Four Factors of Leadership.
Leader
You must have an honest understanding of who you are, what you know, and what you can do. Also, note that it is the followers, not the leader or someone else who determines if the leader is successful. If they do not trust or lack confidence in their leader, then they will be uninspired. To be successful you have to convince your followers, not yourself or your superiors, that you are worthy of being followed.
Followers
Different people require different styles of leadership. For example, a new hire requires more supervision than an experienced employee. A person who lacks motivation requires a different approach than one with a high degree of motivation. You must know your people! The fundamental starting point is having a good understanding of human nature, such as needs, emotions, and motivation. You must come to know your employees' be, know, and do attributes.
Communication
You lead through two-way communication. Much of it is nonverbal. For instance, when you “set the example,” that communicates to your people that you would not ask them to perform anything that you would not be willing to do. What and how you communicate either builds or harms the relationship between you and your employees.
Situation
All situations are different. What you do in one situation will not always work in another. You must use your judgment to decide the best course of action and the leadership style needed for each situation. For example, you may need to confront an employee for inappropriate behavior, but if the confrontation is too late or too early, too harsh or too weak, then the results may prove ineffective.
Also note that the situation normally has a greater effect on a leader's action than his or her traits. This is because while traits may have an impressive stability over a period of time, they have little consistency across situations (Mischel, 1968). This is why a number of leadership scholars think the Process Theory of Leadership is a more accurate than the Trait Theory of Leadership.
Various forces will affect these four factors. Examples of forces are your relationship with your seniors, the skill of your followers, the informal leaders within your organization, and how your organization is organized.
Good leaders are made not born. Good and effective leaders develop through a never ending process of self-study, education, training, and experience. In order to inspire others into higher levels of teamwork, there are certain things you must be, know, and, do. These do not come naturally, but are acquired through continual work and study. Good leaders are continually working and studying to improve their leadership skills; they are NOT resting on their laurels.
What is leadership?
Leadership is a process by which a person influences others to accomplish an objective and directs the organization in a way that makes it more cohesive and coherent. Leadership is a process whereby an individual influences a group of individuals to achieve a common goal.
Leaders carry out leadership process by applying their leadership knowledge and skills (Process Leadership). Actions of leaders are influence by the traits they possessed (Traits Leadership).
While leadership is learned, the skills and knowledge processed by the leader can be influenced by his or hers attributes or traits, such as beliefs, values, ethics, and character. Knowledge and skills contribute directly to the process of leadership, while the other attributes give the leader certain characteristics that make him or her unique.
Skills, knowledge, and attributes make the Leader.
Four Factors of Leadership.
Leader
You must have an honest understanding of who you are, what you know, and what you can do. Also, note that it is the followers, not the leader or someone else who determines if the leader is successful. If they do not trust or lack confidence in their leader, then they will be uninspired. To be successful you have to convince your followers, not yourself or your superiors, that you are worthy of being followed.
Followers
Different people require different styles of leadership. For example, a new hire requires more supervision than an experienced employee. A person who lacks motivation requires a different approach than one with a high degree of motivation. You must know your people! The fundamental starting point is having a good understanding of human nature, such as needs, emotions, and motivation. You must come to know your employees' be, know, and do attributes.
Communication
You lead through two-way communication. Much of it is nonverbal. For instance, when you “set the example,” that communicates to your people that you would not ask them to perform anything that you would not be willing to do. What and how you communicate either builds or harms the relationship between you and your employees.
Situation
All situations are different. What you do in one situation will not always work in another. You must use your judgment to decide the best course of action and the leadership style needed for each situation. For example, you may need to confront an employee for inappropriate behavior, but if the confrontation is too late or too early, too harsh or too weak, then the results may prove ineffective.
Also note that the situation normally has a greater effect on a leader's action than his or her traits. This is because while traits may have an impressive stability over a period of time, they have little consistency across situations (Mischel, 1968). This is why a number of leadership scholars think the Process Theory of Leadership is a more accurate than the Trait Theory of Leadership.
Various forces will affect these four factors. Examples of forces are your relationship with your seniors, the skill of your followers, the informal leaders within your organization, and how your organization is organized.
Wednesday, August 10, 2011
Business Strategy: Value Chain Analysis
Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings:
(1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and
(2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.
Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced").
Linking Value Chain Analysis to Competitive Advantage
What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.
Primary Activities
Primary value chain activities include:
Primary Activity
Inbound logistics: All those activities concerned with receiving and storing externally sourced materials.
Operations: The manufacture of products and services - the way in which resource inputs (e.g. materials) are converted to outputs (e.g. products)
Outbound logistics: All those activities associated with getting finished goods and services to buyers
Marketing and sales: Essentially an information activity - informing buyers and consumers about products and services (benefits, use, price etc.)
Service" All those activities associated with maintaining product performance after the product has been sold.
Support Activities
Support activities include:
Secondary Activities
Procurement: This concerns how resources are acquired for a business (e.g. sourcing and negotiating with materials suppliers)
Human Resource Management: Those activities concerned with recruiting, developing, motivating and rewarding the workforce of a business.
Technology Development: Activities concerned with managing information processing and the development and protection of "knowledge" in a business .
Infrastructure: Concerned with a wide range of support systems and functions such as finance, planning, quality control and general senior management .
Steps in Value Chain Analysis
Value chain analysis can be broken down into a three sequential steps:
(1) Break down a market/organisation into its key activities under each of the major headings in the model;
(2) Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage;
(3) Determine strategies built around focusing on activities where competitive advantage can be sustained
(1) Primary Activities - those that are directly concerned with creating and delivering a product (e.g. component assembly); and
(2) Support Activities, which whilst they are not directly involved in production, may increase effectiveness or efficiency (e.g. human resource management). It is rare for a business to undertake all primary and support activities.
Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced").
Linking Value Chain Analysis to Competitive Advantage
What activities a business undertakes is directly linked to achieving competitive advantage. For example, a business which wishes to outperform its competitors through differentiating itself through higher quality will have to perform its value chain activities better than the opposition. By contrast, a strategy based on seeking cost leadership will require a reduction in the costs associated with the value chain activities, or a reduction in the total amount of resources used.
Primary Activities
Primary value chain activities include:
Primary Activity
Inbound logistics: All those activities concerned with receiving and storing externally sourced materials.
Operations: The manufacture of products and services - the way in which resource inputs (e.g. materials) are converted to outputs (e.g. products)
Outbound logistics: All those activities associated with getting finished goods and services to buyers
Marketing and sales: Essentially an information activity - informing buyers and consumers about products and services (benefits, use, price etc.)
Service" All those activities associated with maintaining product performance after the product has been sold.
Support Activities
Support activities include:
Secondary Activities
Procurement: This concerns how resources are acquired for a business (e.g. sourcing and negotiating with materials suppliers)
Human Resource Management: Those activities concerned with recruiting, developing, motivating and rewarding the workforce of a business.
Technology Development: Activities concerned with managing information processing and the development and protection of "knowledge" in a business .
Infrastructure: Concerned with a wide range of support systems and functions such as finance, planning, quality control and general senior management .
Steps in Value Chain Analysis
Value chain analysis can be broken down into a three sequential steps:
(1) Break down a market/organisation into its key activities under each of the major headings in the model;
(2) Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage;
(3) Determine strategies built around focusing on activities where competitive advantage can be sustained
Business Strategy: Mc Kinsey Growth Pyramid
Introduction
This model is similar in some respects to the well-established Ansoff Model. However, it looks at growth strategy from a slightly different perspective.
The McKinsey model argues that businesses should develop their growth strategies based on:
• Operational skills
• Privileged assets
• Growth skills
• Special relationships
Growth can be achieved by looking at business opportunities along several dimensions, summarised in the diagram below:
• Operational skills are the “core competences” that a business has which can provide the foundation for a growth strategy. For example, the business may have strong competencies in customer service; distribution, technology.
• Privileged assets are those assets held by the business that are hard to replicate by competitors. For example, in a direct marketing-based business these assets might include a particularly large customer database, or a well-established brand.
• Growth skills are the skills that businesses need if they are to successfully “manage” a growth strategy. These include the skills of new product development, or negotiating and integrating acquisitions.
• Special relationships are those that can open up new options. For example, the business may have specially string relationships with trade bodies in the industry that can make the process of growing in export markets easier than for the competition.
The model outlines seven ways of achieving growth, which are summarised below:
Existing products to existing customers
The lowest-risk option; try to increase sales to the existing customer base; this is about increasing the frequency of purchase and maintaining customer loyalty
Existing products to new customers
Taking the existing customer base, the objective is to find entirely new products that these customers might buy, or start to provide products that existing customers currently buy from competitors
New products and services
A combination of Ansoff’s market development & diversification strategy – taking a risk by developing and marketing new products. Some of these can be sold to existing customers – who may trust the business (and its brands) to deliver; entirely new customers may need more persuasion
New delivery approaches
This option focuses on the use of distribution channels as a possible source of growth. Are there ways in which existing products and services can be sold via new or emerging channels which might boost sales?
New geographies
With this method, businesses are encouraged to consider new geographic areas into which to sell their products. Geographical expansion is one of the most powerful options for growth – but also one of the most difficult.
New industry structure
This option considers the possibility of acquiring troubled competitors or consolidating the industry through a general acquisition programme
New competitive arenas
This option requires a business to think about opportunities to integrate vertically or consider whether the skills of the business could be used in other industries.
This model is similar in some respects to the well-established Ansoff Model. However, it looks at growth strategy from a slightly different perspective.
The McKinsey model argues that businesses should develop their growth strategies based on:
• Operational skills
• Privileged assets
• Growth skills
• Special relationships
Growth can be achieved by looking at business opportunities along several dimensions, summarised in the diagram below:
• Operational skills are the “core competences” that a business has which can provide the foundation for a growth strategy. For example, the business may have strong competencies in customer service; distribution, technology.
• Privileged assets are those assets held by the business that are hard to replicate by competitors. For example, in a direct marketing-based business these assets might include a particularly large customer database, or a well-established brand.
• Growth skills are the skills that businesses need if they are to successfully “manage” a growth strategy. These include the skills of new product development, or negotiating and integrating acquisitions.
• Special relationships are those that can open up new options. For example, the business may have specially string relationships with trade bodies in the industry that can make the process of growing in export markets easier than for the competition.
The model outlines seven ways of achieving growth, which are summarised below:
Existing products to existing customers
The lowest-risk option; try to increase sales to the existing customer base; this is about increasing the frequency of purchase and maintaining customer loyalty
Existing products to new customers
Taking the existing customer base, the objective is to find entirely new products that these customers might buy, or start to provide products that existing customers currently buy from competitors
New products and services
A combination of Ansoff’s market development & diversification strategy – taking a risk by developing and marketing new products. Some of these can be sold to existing customers – who may trust the business (and its brands) to deliver; entirely new customers may need more persuasion
New delivery approaches
This option focuses on the use of distribution channels as a possible source of growth. Are there ways in which existing products and services can be sold via new or emerging channels which might boost sales?
New geographies
With this method, businesses are encouraged to consider new geographic areas into which to sell their products. Geographical expansion is one of the most powerful options for growth – but also one of the most difficult.
New industry structure
This option considers the possibility of acquiring troubled competitors or consolidating the industry through a general acquisition programme
New competitive arenas
This option requires a business to think about opportunities to integrate vertically or consider whether the skills of the business could be used in other industries.
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