Strategy Management 1-5

Envisioning Strategy
Business Models Visualized

(created for and by students)
© Sunil Mehrotra
Strategic Management Process
• Envisioning Strategy
– Definition
– Framework
– Visual Models
• External Analysis
– PEST
– PEST Impact Analysis
• Industry Analysis
– Industry Structure
– Evolution of Industries
– Industry Supply Chain
– Potential Industry Earnings
– Porter’s 5 Forces Analysis
– Competitive Intensity
– Strategies for minimizing competitive forces
– Perceptual Map
– Barriers to Entry/Incumbency advantages
– DSIR effect
• Company Internal Analysis
– Value Creating Processes
– Core Competencies
– Growth Strategies
– SWOT Analysis
– Mckinsey 7-S Framework
– Change Management
– Risk Assessment
– Balanced Scorecard
– GE Mckinsey Matrix
Envisioning Strategy: Visual Models
3
2
1
5
4
1. Visualize
2. Think Clearly
3. Communicate Effectively
4. Understand Deeply
5. Share the Vision
6. Act Coherently
www.idiagram.com
Visual Model
A Business Ecosystem
The
The environment
environment
Governments
Governments
Standards
Standards bodies
bodies
New
New entrants
entrants
Competitors
Competitors
Supplier’
Supplier’s suppliers
Supplier’s suppliers Suppliers
Suppliers Organisation
Organisation Customers
Customers Customer’
Customer’s customers
Customer’s customers
Substitutes
Substitutes
Stakeholders
Stakeholders
International
International law
law
New Paradigm Consulting
Visual Model
Comprehensive View
Strategic Management
• Is the process by which an organization
– Establishes its goals and objectives both short
and long-term
– Formulates plans and charts a course of
action for meeting these goals and objectives
in the desired time-frame.
– Implements the actions
– And analyzes progress and results
Strategic Management
• Deals with
– How to grow the business
– How to satisfy customers
– How to compete with rivals
– How to respond to changing environment
– How to manage each functional piece of the business
– How to build organizational capabilities and align
organization to achieve desired goals
– How to achieve strategic and financial objectives
Mission, Vision and Values
• Vision articulates a view of a realistic,

credible, attractive future for the
organization…it is the all-important bridge
from the present to the future of the
organization.
• Mission describes the purpose of the
organization. It represents the present.
• Values reflect the organization’s culture
and norms of corporate behavior.
Goal, Scope and Objectives
• Goal articulates a desired outcome for the
business over a specific time period
• Scope describes the focus of the
business– geography, product lines and
customer segments.
• Objectives are the measurable and
tangible results to be achieved over a
specified time period
Strategic Planning
• Planning is not about predicting the future
• Planning is not about writing a detailed
road map into the future
• Planning is not about a few people writing
a vision statement & then getting ‘buy-in’
from everyone else
Strategic Planning
• Planning is about learning

• Planning is about increasing the
possibilities for the organisation
• Planning is about discovering how fit the
organisation is for its environment
• Planning is about discovering and telling
compelling stories about the future
Strategic Planning Framework
External Factors Internal Factors
Analyzing
Analyzing the firm’s
Analyzing Analyzing Analyzing the firm’s Architecture,
the the the Strengths & Routines &
Environment Industry Competition Weaknesses Culture
Matching Market Opportunities

to firm’s resources and capabilities Firm’s Resources &
Market Opportunities
Capabilities
•What strategic options does the
firm realistically have?
•What is the best strategy for
maximizing Shareholder value?
Shareholder
Returns
Strategic Planning Framework
•Direct Competition from Rivals Cost Position in

Market Economics •Bargaining Power of Suppliers Served Market Competitive Advantage
Market
And •Bargaining Power of Customers Benefit Position in Or Disadvantage
Attractiveness
Opportunities •Threat from new entrants Served Market
•Competition from Substitutes
Analyzing

Capabilities
•What is the best strategy for
maximizing Shareholder value?
•Profit
•Sales Shareholder
•Market Share Returns
•ROI
•Market Value
Strategic Analysis Framework
•Week 3 •Week 8
•Week 11
•Week 1 •Week 4 • Week 6 •Week 9
•Week 12
•Week 2 •Week 5 • Week 7 •Week 10
Analyzing

Capabilities
•What is the best strategy for •Week 13
maximizing Shareholder value? •Week 14
•Profit
•Sales Shareholder
•Market Share Returns
•ROI
•Market Value
Three Tests of Best Strategy
• A good strategy has to be well matched
to Industry and competitive conditions,
market opportunities and threats, and
other aspects of a firm’s external
The Goodness of environment
Future: To here • At the same time, it has to be tailored to
Fit Test
the company’s resource and strengths
and competitive capabilities
•A good strategy leads to sustainable

competitive advantage
The Competitive •The bigger the competitive edge the
Advantage Test strategy helps build the more powerful
and effective it is
•A good strategy boosts company performance

The Performance -Gains in profitability
Test -Gains In competitive strength and long-term
market position
Present : From here
www.studymarketing.org
16
DEFINITION
Strategy (n) – An integrated set of actions

designed to achieve a sustainable
competitive advantage
2
17
PURPOSE OF STRATEGY
• Focus execution efforts
• Always requires good execution
• Make choices
• Investments
• Acquisitions
• People
• Create value
WHAT ARE THE COMPONENTS 18
OF A STRATEGY?
• Mission
• Goals
• Where to compete/grow
– Customers/geographies
• What to offer
– Products/services
• How to win vs competition
• Actions and initiatives required

WHAT MAKES FOR A GOOD 19
STRATEGY?
• Clear and compelling
• Integrated and complete
• Grounded in facts
• Clear short and long term priorities
• Identification of specific actions and resources required

20
AGENDA
• What is strategy?
• What is Lulu’s strategy?
• How do we make it better?

Establish the marketplace for digital
• Mission: content where authors make money
from their written works
By 2011:
over $2B valuation
• Goals: + Gross margin 50%+
#1 in our business
Global unserved and underserved

• Target Markets: profit-motivated book creators,
Licensed/tier-one rights holders
Book creation and publishing tools and services, Social

• Offerings: Network marketing and commerce,
Ebook tools, Marketplace for any content
“Free” business model

Most $ to authors
• Differentiator: Engaged reader-writer community, Open Marketplace
Reader device ubiquity, Global reach
• International expansion 5. Share financial success with those

who create it
• Actions • Social Network integration
(weRead) 6. Make Lulu platform an ecosystem
and initiatives: • 3rd party book marketplace 7. Mobile cart and customer acquisition
• eBook wizard 8. Increase licensed content partnerships
Strategy and Performance:
“There are three kinds of companies— those that make things
happen, those that watch things happen, and those that wonder
what happened.” Anonymous
.

© Sunil Mehrotra
– Definition
– Framework
– Visual Models
– PEST
– Perceptual Map
– DSIR effect
– SWOT Analysis
– Risk Assessment
© Sunil Mehrotra
PEST Analysis
GDP
Fiscal Policy GDP growth
Monetary Policy Exchange rate
Tax laws Unemployment rate
Intellectual Property protection Skilled labor
ic Education levels
Copyright laws m
Securities Laws Poli
tica ono ge Trade unions
Ec han
Infrastructure
Business climate l Cha Healthcare costs
ng e C Raw materials
Opportunities
Opportunities
Threats
Threats
New technologies i cal
log e So Demographics
Materials technologies
o c
Process technologies
chn ang Ch ial Income Distribution
Information technologies Te ang Social stability
Communication technologies
Ch e Ethnic patterns
Consumerism
Government incentives
Discretionary income
Energy costs
Fashions/fads
Broadband penetration Consumer trends
Technology incubation
© Sunil Mehrotra
It is crucial to describe the subject
for the PEST analysis clearly so
that people, contributing to the
analysis, and those interpreting the
results from PEST analysis, could
PEST Impact Matrix
understand the purpose of the
PEST assessment and its
implications
Impact of Opportunities Threats

Threats Strategic
Nature of
change response
change
Political Change
Economic
Change
Social
Change
Technological
Change
© Sunil Mehrotra
PEST Impact example:

Threats Strategic
Nature of
change response
change
Political Change
Economic
Change
Social
Change
Technological
Change
© Sunil Mehrotra
PEST Analysis Example:
ic
m
Poli ono ge
tica Ec han
Emerging
Infrastructure
l Ch Markets
ang Technologies C
e
Digital
Connections
Originations
Opportunities
Opportunities
Environmental Demographics
Solutions
i cal So
l og c
o Ch ial
chn ange ang
Te Ch e
© Sunil Mehrotra

Threats Strategic
Nature of
change response
change
Political Change
Economic
Change
Social
Change
Technological
Change
© Sunil Mehrotra
Demographics
© Sunil Mehrotra
© Sunil Mehrotra
Scenario Planning
http://strategicframing.com/strategic-planning-workshop/
Contemplating the Future
Student Examples: Pest Analysis
Breanne Hayes
April 2008 MBA
Graziadio School of Business and
Management
Pepperdine University
Elizabeth Passeretti
April 2008 MBA Candidate
Management
PEST Analysis
Impact on J&J
Political Change
– The FDA must approve new products before high

they can be sold in the market, adding to the
costly time-lag within the product pipeline.
Economic
Change
– Demand for many consumer health products is
inelastic as changes in price do not tend to medium
affect sales (consumer health products are
used on a daily basis). In times of economic
uncertainty, however, it is less likely that
consumers will experiment with new product
offerings
Breanne Hayes, April 2008 MBA,

Graziadio School of Business and Management Pepperdine University
PEST Analysis
Social
Change Impact on J&J
– Increased consumer awareness
regarding health issues in recent years
has contributed to increased spending
on health related products. Increased high
health awareness is what will drive
J&J’s expansion into global markets
Technological
Change
– The consumer health industry is high
marked by rapid advances in scientific
knowledge. Product offerings are
subject to constant improvements in
chemistry and industrial technology that
allow scientists and engineers to create
new products and modify existing ones

PEST example:

Threats Strategic
Nature of
change response
change
Shorten
More
Political Change FDA Longer time Product
approval process conservative to market Development
Cycle
Economic US economic Consumer Generic Evaluate

drugs more acquisitions
Change downturn spending
accepted
down
Identify
Social Caring for
Aging New growth product/market
the elderly
Population opportunities
Change needs to serve
the elderly
New New New

Technological Potential
materials for cost/quality products Invest in
new promising
Change joint frontier competitors start-ups
replacement
© Sunil Mehrotra
Political Change
Biotech firms are highly sensitive to changes in political power. A

Liberal political party will likely reform healthcare so that the Impact
government bears more of the costs. The upcoming elections will
have a significant impact on the industry. In addition, the industry
if highly regulated by government agencies such as the FDA.
High
As most of the costs of drugs are subsidized by third-party payers

(Medicare, Health Insurance), people will continue to purchase
drugs even in an economic downturn. In addition, many of these
Economic
drugs are taken out of necessity, not choice so demand is

Change
inelastic.
However, third-party payers certainly feel the pain of an economic
downturn and may impose cost cutting measures which reduce
Medium
patient reimbursement and put more of an economic burden on
patients. And Biotech firms often depend on single-source
suppliers for raw materials and are therefore sensitive to
increasing costs.
Elizabeth Passeretti April 2008 MBA Candidate
Graziadio School of Business and Management,Pepperdine University
Impact
Change
The aging population greatly increases the patient population

Social
which is beneficial for Biotech firms. The unfortunate reality is High

that more people are suffering from serious illness and need
life saving therapeutics.
As evident by the very name of the industry, Biotech firms are

Technological
highly influenced by advances in technology. Technology can

High
Change
greatly improve the likelihood of discovering new treatments as

well as improving the manufacturing process.


Threats Strategic
Nature of
change response
change
Operational
Democratic party More
Political Change in power government
Pressure on Efficiency to
prices reduce costs
control
Economic $100+ crude oil Commodity Pressure Focus on

Operational
Change price prices on costs
Efficiency
increasing
Identify
Social Caring for
Aging New growth product/market
the elderly
Population opportunities
Change needs to serve
the elderly
Breakthrough New science New start- Potential Invest
Technological in science. and new ups. new in/acquire
Process technologies Disruptive competitors promising
Change improvement imminent technologies start-ups
technologies
© Sunil Mehrotra

© Sunil Mehrotra
– Definition
– Framework
– Visual Models
– PEST
– Perceptual Map
– DSIR effect
– SWOT Analysis
– Risk Assessment
© Sunil Mehrotra
Industry Analysis
Understand Deeply
Suppliers
Competitors
Industry Analysis
•Porter’s 5 Forces Analysis
•Competitive Intensity
•Strategies for minimizing
competitive forces
Customers •Incumbency advantages
•Value Chain
•Potential Industry Earnings
•Evolution of Industries
•DSIR effects
© Sunil Mehrotra
Low
Spectrum of Competition High
Competitive Intensity
Perfect Competition
•Many firms
Niche Market •No product differentiation
•Product Differentiation •Price based competition
Oligopoly •Localized competition
•Few Firms Commodities
Clothing Stores
•Strategic Interdependence Gas Stations
•Profitability determined by behavior
Dominant Firm
•Few large firms Automobiles
•More small firms Commercial Aircrafts
•Pricing leadership
Monopoly •Protected Niches
Single Firm
Computer OS
Utilities
Industry Profitability
Adapted from: Saloner, Shepard, & Podolny: Strategic Management, Wiley and Sons, 2001 © Sunil Mehrotra
Industry Evolution: Traditional View
Introduction Growth Maturity Decline
Revenue
Operating
Income
Increasing sales and profits Saturation

Losses Displaced by substitute products
New competitors appear Declining profits
Few competitors Profitability falls
Standardized features
Only a few large scale players survive
Industry shakeout
Oligopoly
•Few Firms
Most industries evolve towards •Strategic Interdependence
•Profitability determined by
behavior of incumbents
© Sunil Mehrotra Adapted from: http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/HomaHelp.htm
The New View:
The Cycle of Industry Creative Destruction
1 Mature/Vertically
Integrated
 Three major phases of industry
evolution
 “Cycle time” of evolution is driven

by the pace and magnitude of
marketplace discontinuities
 Cycle-driving discontinuities
include deregulation, technology,
shifts in consumer preferences,
globalization of markets, etc.
3 2
Recombinant Focused
Market New Entrants
Leaders http://www.manyworlds.com/
The New View:
The Cycle of Industry Creative Destruction
Sales and Direct

Distribution
Superstores Retail
Application Word Wordperfect Others

Software
Operating
System
Windows Apple Linux
Computer
IBM HP Apple Dell
Chips
INTEL AMD
IBM DEC Sperry Wang

Univac
The “mature” The “recombinant”

Computer Industry Computer Industry
Adapted from: Saloner, Shepard, & Podolny: Strategic Management, Wiley and Sons, 2001
Industry Supply/Value Chain
Suppliers
Manufacturers
Distributors
Retailers
Consumers
© Sunil Mehrotra
Student Examples: Supply Chain
Breanne Hayes
April 2008 MBA
Management
Elizabeth Passeretti
April 2008 MBA
Management
Overview of Industry Value Chain:
Consumer Health Products
Cotton, Plastics, Chemicals, etc.
Incumbent Firms engage in R&D

NOTE: Incumbent firms
and Mfg to produce
consumer health products compete fiercely for
and OTC pharmaceuticals retailer shelf space!
Market size: $480B

Wholesalers
Retailers:
Pharmacies, Drug Stores, Supermarkets
Consumers
Industry Analysis Legend
Value = Product
Value = Knowledge
Regulators/Gatekeepers
Industry Supply Chain
Raw materials, Lab equipment,
Chemicals
Biotech Companies $52 billion

market
FDA
Physicians
Drug Wholesalers (61%) $67 billion
(Customers) market
Hospitals / Pharmacies (39%)

Payers
(Insurance)
Patients (Consumers)
Supply Chain: Value Added
Profit Value
Added
Value
PRICE
Added
Value
Added
Material
cosls
Manufacturers
Consumers
Distributors
Suppliers
Retailers
© Sunil Mehrotra
Value Added Template
Manufacturers
Consumers
Distributors
Suppliers
Retailers
Value Added
Profitability
Asset
Intensity
ROI
Adapted from: http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/HomaHelp.htm

Potential Industry Earnings (PIE) Analysis
Factors effecting demand:

•Customer habits
•Customer expenditures
•Number of substitutes
•Number of complementary products
•Price reduction by incumbents
Industry Demand
Factors effecting costs
•Cost reductions by suppliers
•Cost reductions by incumbents
•Process improvements
PIE •Technology advances
Opportunity Cost of
Resources
Quantity Produced by the Industry
PIE Analysis
J&J is in a position to capture
Price more potential industry earnings
as a result of increased consumer
demand
Demand shifting outward
Cost to J&J
Quantity

Porter’s 5 Forces Impact on PIE
• Porter’s insight recognizes that the
following characteristics are important to
profitability of the incumbent:
•Intensity of Competition – The intensity of competition
•Availability of Substitutes – The ability of suppliers or buyers of
•Threat of new entrants industry products to restrain industry
•Bargaining power of Buyers profits
– The behavior of firms producing
closely related goods not included in
the industry
Industry Demand – Potential for entry into the market by
new firms
PIE Opportunity Cost of

Resources
•Bargaining Power of
Suppliers
Quantity Produced by the Industry
Porter’s 5 Forces Framework
Concentration of buyers
Economies of scale
Incumbents are fragmented
Product is undifferentiated High initial investments and fixed costs
Switching to another supplier is simple Learning economies
Product is not strategic to the customer Depreciated assets
Customers can produce the product Brand loyalty
themselves
Protected intellectual property
Customer knows the production costs
Customers can integrate back-words Scarcity of qualified resources
Access to raw material controlled by existing players
Distribution channels controlled by existing players
Existing players have close customer relations
Better prices
Better performance
Similar functionality
Few large suppliers

No substitutes
Customers are fragmented Many small players
Switching costs to another supplier are high High cost to exit
Supplier integrating forward Undifferentiated products
Economies of scale Compete on price
Downstream more profitable Low brand loyalty
Low barriers to entry downstream Low switching costs
Slow/no growth market
www.themanager.org
© Sunil Mehrotra
Impact on Profitability
Threat/Power
Industry Industry
A B
High Moderate Low
Competitive
Intensity
Bargaining power
of Suppliers
Bargaining power of
Customers
Threat of New Entrants
Threat from Substitutes
Profits © Sunil Mehrotra

Student Examples:
Porter’s 5 Forces Analysis
Breanne Hayes
April 2008 MBA
Management
Nicholas Merriam
April 2008 MBA
Management
Matt Kemp Thomas Weisel Partners

April 2008 MBA
Management
Porters 5 Forces:
• Coffee Growers
• Pastry makers Consumers
• Coffee machine
makers
• Teas
• Juices
• Regular coffee Nicholas Merriam, April 2008 MBA,
Porter’s 5 Forces:
Barriers to entry: Small
firms generally specialize in
R&D and cannot realize
Similarity of manufacturing efficiencies
products enables that large incumbents benefit
easy switching from
MODERATE WEAK
MODERATE
INTENSE
Generic products capture

value from consumers who
are not willing to pay a
premium for brand name
products
INTENSE
Porter’s 5 Forces: Thomas Weisel Partners
Customer’s
Customer’s Power
Power Threat
Threat of
of New
New Entry
Entry
Companies
Companies are are able
able to
to Bulge
Bulge Bracket
Bracket Banks
Banks
choose
choose whowho theythey partner
partner encroaching
encroaching into
into Middle
Middle
with,
with, but
but are
are limited
limited by
by Market
Market
their
their ability
ability to
to run
run aa
MODERATE
business
business and
to
to investors.
and shop
investors.
shop aa deal
deal
High
MODERATE
WEAK
Supplier’s
Supplier’s Power
Power
Investors
Investors have
have power
power toto
choose
choose where they place
where they place
there
there money,
money, but
but don’t
don’t have
have
ability
ability to organize or
to organize or know
know of
of
new
new opportunities.
opportunities.
INTENSE
Competitive
Competitive Intensity
Intensity
Industry
Industry isis highly
highly
competitive
competitive Mathew Kemp, April 2008 MBA,
Threat/Power
High Moderate Low
Competitive
Intensity
Bargaining power
of Suppliers
Bargaining power of
Customers

Threat/Power
High Moderate Low
Competitive
Intensity
Bargaining power
of Suppliers
Bargaining power of
Customers

Strategies for minimizing the power of competitive forces
Reducing the threat of New Entrants
Increasing minimum efficient scales of operations
Creating brand image/loyalty
Protection of intellectual property
Reducing the Bargaining Power of Customers
Alliances with linked products/services
Partnering
Tie up with suppliers
Increase loyalty
Tie up with distributors
Increase incentives and value added
Retaliation tactics
Increase switching costs
Cut out intermediaries
Cut out intermediaries
Reducing threat of substitutes

Increase switching costs
Form alliances
Enter substitute market
Accentuate differences
Reducing the Bargaining Power of Suppliers

Partnering Reducing competitive rivalry within
Supply Chain Management Differentiate your product
Increase mutual dependency Avoid price competition
Build knowledge of supplier costs/methods Reduce industry over capacity
Take-over supplier Focus on different customer segments
Adapted from: www.themanager.org

Porter’s 5 Forces and Generic Strategies
Cost Leadership Differentiation Focus
Rivals cannot meet

Better able to Brand loyalty to
Competitive keep customers focused customer
compete on price
Intensity from switching needs
Bargaining power Better insulated Better able to pass on Better able to pass on
of Suppliers supplier price increases supplier price increases
from suppliers
to customers to customers
Bargaining power Better positioned Fewer alternatives Fewer alternatives

of Customers to offer lower available to switch to available to switch to
prices
Ability to deter
Threat of New new entrants by Customer loyalty can Specialization develops
Entrants unique competencies
offering lower deter new entrants
difficult for new entrants
prices
to match
Can use lower
Customers less willing Customers less willing
Threat from prices to defend to accept substitutes to switch to substitutes
Substitutes against substitutes
Examples:
www.studymarketing.org
Product Differentiation minimizes
competitive intensity
Perceptual Map of Automobile Brands
• Perceptual Maps are a visual

display (usually on two
dimensions) of how brands are
perceived by customers.
• The closer the brands are
positioned in this space the
more competitive they are to
each other.
• Perceptual Maps identify “open
spaces” or unmet customer
needs.
• Perceptual Maps identify salient
attributes of the products on
which consumers differentiate
brands.
Adapted from: http://en.wikipedia.org/wiki/Perceptual_mapping

Perceptual Map of the Beer
Market
Heavy Popular
Full Bodied Heavy with Men
Old Milwaukee
•
Budweiser
• Beck’s •
Meister Brau Special • Heineken
• Miller • Occasions
Premium
Blue Collar
Good Value • Dining Out
• Coors
Budget Stroh’s Premium
• Michelob
• Coors Popular
Pale Color
Miller
Lite
• Light with
On a
• Women
Old
Budget Milwaukee Light Light Light Less Filling
Adapted from: Prof. Ganesh Iyer, UC Berkeley
Perceptual Map of 2000 Presidential Candidates
Leader
Colin Powell
John McCain
George W. Bush
Religious
Traditional
Bill Bradley Conservative
Liberal
Alan Keyes
Elizabeth Dole
Steve Forbes
Al Gore
Pat Buchanan
Donald Trump
Jesse Jackson
Republican
Opportunistic
Democrat
Source: 12Americans.com, 2000
www.populus.com
Independent
Student Examples:
Perceptual Mapping
Nina Tooley
April 2008 MBA
Management
Perceptual Map Example:
Contemporary
Zara
Discount Expensive
Classic
Nina Tooley, April 2008 MBA,

Perceptual Map Example:
Contemporary
Zara
Young Mature
Classic
Nina Tooley, April 2008 MBA,
Barriers to Entry/
Incumbency Advantage
• Economies of Scale
• Cumulative Investments
• Learning economies
• Innovation advantage
• Promotional advantage
• Customer loyalty
advantage
• Switching costs advantage
• Demand Side increasing
returns advantage
© Sunil Mehrotra
Economies of scale occur when increased output leads to lower unit costs (lower average costs)
Wal-Mart can sell products more cheaply because its huge buying power gives it economies of scale.

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Envisioning Strategy

Business Models Visualized

• Vision articulates a view of a realistic,

• Planning is about learning

Matching Market Opportunities

•Direct Competition from Rivals Cost Position in

Matching Market Opportunities

Matching Market Opportunities

•A good strategy leads to sustainable

•A good strategy boosts company performance

Present : From here

Strategy (n) – An integrated set of actions

• How to win vs competition

• Actions and initiatives required

• Integrated and complete

• Clear short and long term priorities

• Identification of specific actions and resources required

• What is Lulu’s strategy?

• How do we make it better?

Global unserved and underserved

Book creation and publishing tools and services, Social

“Free” business model

• International expansion 5. Share financial success with those

Business Models Visualized

Impact of Opportunities Threats

Impact of Opportunities Threats

Impact of Opportunities Threats

– The FDA must approve new products before high

Breanne Hayes, April 2008 MBA,

Breanne Hayes, April 2008 MBA,

Impact of Opportunities Threats

Economic US economic Consumer Generic Evaluate

New New New

Biotech firms are highly sensitive to changes in political power. A

As most of the costs of drugs are subsidized by third-party payers

drugs are taken out of necessity, not choice so demand is

The aging population greatly increases the patient population

which is beneficial for Biotech firms. The unfortunate reality is High

As evident by the very name of the industry, Biotech firms are

highly influenced by advances in technology. Technology can

greatly improve the likelihood of discovering new treatments as

Elizabeth Passeretti April 2008 MBA Candidate

Impact of Opportunities Threats

Economic $100+ crude oil Commodity Pressure Focus on

Business Models Visualized

Increasing sales and profits Saturation

 “Cycle time” of evolution is driven

Sales and Direct

Application Word Wordperfect Others

IBM DEC Sperry Wang

The “mature” The “recombinant”

Incumbent Firms engage in R&D

Market size: $480B

Biotech Companies $52 billion

Hospitals / Pharmacies (39%)

Adapted from: http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/HomaHelp.htm

Factors effecting demand:

Quantity Produced by the Industry

Demand shifting outward

Breanne Hayes, April 2008 MBA,