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Key Elements of
Business
Strategy
CPIM Module 5
Stephan Pire
Strategic Planning
External
Environment
Developing
Competitive
Strategy
Internal
Environment
External Environment
 7 Issues to address:
o Industry Profitability
o Key factors for future success
o Likely moves by Rivals
o Market Positions for members
o Forces driving the changes
o Strength of competitive forces
o Industry Dominant economic features
11 Features to Investigate
 Market size & growth
 Number of rivals
 Scope of rivalry
 Number of buyers
 Product differentiation
 Product innovation
 Supply & Demand
conditions
 Technological changes
 Vertical integration
 Economy of scale
 Learning and
experience
5 Forces of Porter
 Competition
 Substitutes
 Potential
New
Entrants
 Suppliers
 Buyers
14 Most Common Driving Forces
 Emerging New Internet
Capabilities
 Increasing Globalization
 Change Long-Term Growth Rate
 Change in Buyers behaviours
 Product Innovation
 Technological change in Mfg
 Marketing Innovation
 Entry/Exit of Major firms
 Diffusion of Tech know-how
 Changes in Cost/Efficiency
 Shift from Low Cost to
Differentiated in industry
 Reduction in Risk/Uncertainty
 Regulatory changes
 Changing Societal/Lifestyle
concerns
5 Internal Issues
1. Performance of current
strategy
2. SWOT
3. Competitiveness
4. Strength vs Competitors
5. Highest-priority issues to
Managment
Generic Competitive Strategy
1. Focused Low Cost
2. Overall Low Cost
3. Focused
Differentiation
4. Broad Differentiation
5. Best-Cost Provider
Strategy
Key Performance Objectives
 Speed
o Customer Query time
o Order Leadtime
 Dependability
o % of orders delivered late
 Flexibility
o Time needed to develop Products & Services
 Quality
o Number of defects per unit
 Cost
o Efficiency
5 Key Process Layouts & Choices
 Project - Fixed Functional
 Jobbing - Functional Cells
 Batch - Functional Cells
 Repetitive - Cell Product
 Mass/Continuous - Product Line
4 types of Financial Ratios
 Liquidity Ratios
o Current Ratio
o Quick Ratio
 Activity Ratios
o Inventory Ratios
o A/R Turnovers
o Days in A/R
 Leverage Ratios
o Debt Ratios
o Time-interest-earned Ratios
 Profitability Ratios
o Rate of return on net sales
o Rate of return on assets

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Key things to master for CPIM's SMR certification

  • 3. External Environment 7 Issues to address: o Industry Profitability o Key factors for future success o Likely moves by Rivals o Market Positions for members o Forces driving the changes o Strength of competitive forces o Industry Dominant economic features
  • 4. 11 Features to Investigate Market size & growth Number of rivals Scope of rivalry Number of buyers Product differentiation Product innovation Supply & Demand conditions Technological changes Vertical integration Economy of scale Learning and experience
  • 5. 5 Forces of Porter Competition Substitutes Potential New Entrants Suppliers Buyers
  • 6. 14 Most Common Driving Forces Emerging New Internet Capabilities Increasing Globalization Change Long-Term Growth Rate Change in Buyers behaviours Product Innovation Technological change in Mfg Marketing Innovation Entry/Exit of Major firms Diffusion of Tech know-how Changes in Cost/Efficiency Shift from Low Cost to Differentiated in industry Reduction in Risk/Uncertainty Regulatory changes Changing Societal/Lifestyle concerns
  • 7. 5 Internal Issues 1. Performance of current strategy 2. SWOT 3. Competitiveness 4. Strength vs Competitors 5. Highest-priority issues to Managment
  • 8. Generic Competitive Strategy 1. Focused Low Cost 2. Overall Low Cost 3. Focused Differentiation 4. Broad Differentiation 5. Best-Cost Provider Strategy
  • 9. Key Performance Objectives Speed o Customer Query time o Order Leadtime Dependability o % of orders delivered late Flexibility o Time needed to develop Products & Services Quality o Number of defects per unit Cost o Efficiency
  • 10. 5 Key Process Layouts & Choices Project - Fixed Functional Jobbing - Functional Cells Batch - Functional Cells Repetitive - Cell Product Mass/Continuous - Product Line
  • 11. 4 types of Financial Ratios Liquidity Ratios o Current Ratio o Quick Ratio Activity Ratios o Inventory Ratios o A/R Turnovers o Days in A/R Leverage Ratios o Debt Ratios o Time-interest-earned Ratios Profitability Ratios o Rate of return on net sales o Rate of return on assets