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Kirin Where are you

today?
Current product market choice
Current terms of competition
Increase in market share through differentiation
High market share through increased production
Focus on home consumption
Number and geographic distribution of brewing plants
Economies of scales in distribution system
Good second mover - Kirin immitated anyone coming out with a
new product and used its advantage in reputation, distribution
and financial clout to gain advantage over originator
Use of differentiation to achieve product parity only

Strengths and weaknesses


Weaknesses => identify major problem(s)

Kirin vs Competition
SWOT => derive business strategy
Plot ROE vs market share for all
companies
Implication of Kirins position for its
business level strategy

Outcome
significant competitor
Significant terms of competition
Define future competition terms
How to change the playing field?

Kirin Where best to go from here?


Options => cost leadership, differentiation,
focus
Recommended strategy
target customers (with full specification of their
attributes)
product(s) and breadth of product line (with fully
specified price and quality/benefits)
geography, locations served
operations strategy, in-house production,
outsourcing, vertical integration, etc.

Why not the others?

Kirin What not to focus on?


Why not the other business
strategies?

Kirin How to implement the


chosen strategy?
Functional strategies
How to positively impact primary
activities?
How to positively impact support
activities?

Action steps

Backup slides

SWOT
Rows S, W, O, T
Sub-rows
Financial ratios
Operating ratios

Columns Companies
Operating ratios - Nominal range for the
given industry
Financial ratios Nominal range for other
industries in the same country/region

Financial ratios
Chart color grade based on its
attractiveness
Explain how the company achieved
the existing level of attractiveness
Explain how chosen strategy would
impact the ratios

Operating ratios
Chart color grade based on its attractiveness
Explain how the company achieved the existing
level of attractiveness
Explain how chosen strategy would impact the
ratios
Explain impact to current value chain activities
Value chain activities
Primary activities: inbound logistics, operations, outbound
logistics, marketing and sales, service
Support activities: procurement, technology development,
human resource management, firm infrastructure
Organization structure

Functional strategies
ROE
ROS business strategy
Asset turnover technology strategy
Characteristic of the industry? Is it uniform
across players in the industry? If not,
analyze why.

Financial leverage financial strategy


Calculate beta => cost of equity will go up
and future profits will be discounted at a
higher rate

Recommended strategy
How to implement the strategy?
How will it impact RoE?
Which sub factor will it impact? Does the
denominator or numerator or both in
tandem change?

How will it impact Porters five


competitive forces?

Functional strategy financial


leverage
Gives rise to 2 different generic
business level strategies
Increasing price to earn above
average returns => differentiation
Decreasing cost => cost leadership

Cost Leadership
Goal achieve low cost position
Propellants
Favorable access to raw materials
High capital

Implementation
Aggressive construction of efficient scale facilities
Cost minimization in R&D, service, sales force, advertising

Requirements
Heavy capital investment
Aggressive pricing
Probably incur start-up losses
Low cost distribution system

Strengths
Virtuous cycle => low cost -> high market share -> high margins -> reinvestment in new
equipment and technology -> low cost

Threats
Imitation by competition
Anti-monopoly
Change in technology

Differentiation
Goal gain brand loyalty and increase customer willingness to pay a premium for
perceived product uniqueness and superiority
Propellants
Strong marketing abilities
Reputation for quality or technological leadership

Requirements
Product engineering, Creative flair
Strong cooperation from channels

Approaches
Design or brand image, Technology, Features, Customer service, dealer network etc

Implementation
Does not allow the firm to ignore costs though not a primary strategic target
Tradeoff with cost position if the activities required in creating it are inherently costly such as
extensive research, product design, high quality materials, or intensive customer support
In some businesses, differentiation may not be incompatible with relatively low costs and
comparable prices to those of competitors

Caveats
May sometimes preclude gaining a high market share - Creates a perception of exclusivity
which is incompatible with high market share

Focus
Focusing on a particular buyer group,
segment of the product line, or
geographic market
Caveats
Precludes high market share

Value Chain

TBD
Cost of a single beer how will
recommended financial ratios impact
the contributors to cost and thereby
price use this to arrive at
recommended price
Why sell more soft drinks? Youth
transition from soft drinks to
alcoholic beverages

Work allocation - Tue


Competition Tarun
Groups events under provided heads
Associate data points with value chain activities

Graphs for financial/operating ratios


Neeraj/Ashish
Functional strategies/policies/future
Bhuvana
Template Ashish
SWOT - Yogesh

Work allocation - Wed


Kirin Current position Ashish
Competition Tarun
Current product market choice
Current terms of competition

Kirin + Competition - Yogesh


SWOT (do NOT use ratios)
Value chain (do for Kirin and competition)

Financial/Operating analysis Neeraj


Future recommendation - Bhuvana
SLIDES ARE DUE today (29th)

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