Features and tools of business modeling
The company's strategy changes over time, its mission, vision and business model change (Figure 4.7).
Fig. 4.7. Change in the competitive position, mln. Dollars, in time in the period 1996-2015
In order for strategies developed at different levels of management to be consistent with the time and overall business strategy, an approach called "management by objectives" is used; (Figure 4.8).
Fig. 4.8. Management Model by Purpose
Traditionally, portfolio management strategies, growth strategies and competitive strategies are used to manage the company's strategies.
Portfolio strategies include the "JI-AND-MACKINZI" models, the "Pull analysis model", the "Attitude analysis" model, the "Buyer-seller" model.
The purpose of using the model JI-AND-MACKINSY (Figure 4.9) is the most complete description of the company's activities in the structure of two main indicators: the strategic position of the company (the competitive status of the firm or the competitiveness index), which determines the aggregate quality index CXE or the whole enterprise, and the attractiveness of the market , which allows you to assess the prospects for working with a particular target group of consumers. It is a modification of the BCG model.
Fig. 4.9. Matrix JI-AND-MACHKINSY
The main goal of anchoring models is to identify those groups of goods/services that are most ordered by current and potential consumers from the company and all competitors, as well as the number of firms that render this type of service (Figure 4.10).
Fig. 4.10. Fixing Model
The vertical axis indicates the number of consumers that consume or can consume the product, and the horizontal axis indicates the number of firms that offer this service on the market.
The left upper position on the matrix shows the currently most popular 5Vi, while the market shares of firms that currently render this service are insignificant. The lower left position shows services that currently do not have a large number of consumers. The number of producers of this type of service is limited. The right position shows services with the largest market shares of competitors at high and low demand.
Analyze commitment shows how competitive competitors are in the market, the requirements that consumers impose on them, and the market share that the enterprise could take to implement this goods/services (Figure 4.11).
In accordance with this model, the following classification of competitors working in the market is introduced:
• enterprises potential leaders (upper left square: high competitiveness of the proposed product/service, however, a small market share);
• today's leaders (the top right-hand square: a high competitiveness index with a large market share);
• little-known enterprises , the quality of services which does not suit consumers (lower left square: low competitiveness of services, small market share);
• a serious competitor (the lower right corner is an enterprise that has a high share of consumers of goods/services, but their quality does not quite satisfy consumers).
The model allows to describe the activity of the enterprise in the structure of the index of return on investment (or profitability of sales) and assess the consumers the price/quality ratio of the proposed product/service.
Fig. 4.11. A commitment analysis model
When determining the cost of a service on the market, the problem arises of what is considered the best price. There are several ways to solve the problem here:
• The worst service cost is the cost below the average cost that the buyer is willing to pay for the product/service;
• The best cost of the service is the cost equal to the amount that the buyer is willing to pay for it.
If the profitability value can be directly applied to the y-axis after obtaining its numerical value, then a normalization operation is introduced to apply the value "price-quality" ratio.
We introduce the definition of quality and price concepts.Quality of a product/service is an objective aggregate measure that determines the degree of customer satisfaction with a product/service based on its characteristics.
The price of a good/service is a subjective characteristic of a good/service, i.e. the consumer's perception of the price level depends on the individual characteristics of the consumer. The cost of a product/service for one consumer is low (the service is prestigious, fashionable, the consumer's income level is high, etc.), and for another consumer high.
The main indicator is the quality of the product/service, and the auxiliary is its cost for each product/service. Then the normalized value of the ratio price-quality will be calculated using the following formula:
Fig. 4.12. Model Buyer-sellerGrowth strategies include I. Ansoff's matrix (Figure 4.13) and a new matrix BCG (Figure 4.14).
Fig. 4.13. The I. Ansoff Matrix
The Ansoff Matrix assumes you select one or more of the four existing strategies.
1. Market penetration strategy. Effective when the market is growing or not yet saturated. The firm can expand the sale of existing products in existing markets through their offensive advancement, the application of competitive prices. This increases sales by attracting those who previously did not use the products of this company, as well as customers-competitors and increases the demand from the already attracted consumers.
2. Market development strategy. Effective if the firm seeks to increase the sales of existing products. It can penetrate new geographical markets; to enter new market segments, the demand for which is not yet satisfied; re-offer existing products in a new way;
use new methods of distribution and marketing; make more intensive efforts to promote their products.
3. Product development strategy. Effective when the firm has a number of successful brands and enjoys the commitment of consumers. The firm develops new or modified products for existing markets. It focuses on new models, quality improvement and other small innovations that are closely related to already implemented products, and implements them to consumers who are favorably disposed towards this company and its brands. Traditional methods of sales are used; the promotion emphasizes the fact that new products are produced by a well-known firm.
4. The diversification strategy. Used to ensure that the company does not become too dependent on one assortment group. The company is launching new products aimed at new markets. The goals of distribution, marketing and promotion are different from traditional ones for a given firm.
Fig. 4.14. The new matrix BCG
Divergent acquisitions are aimed at entering into new areas of market activity for the enterprise that are not related to its past commercial and technological activities. The company acquiring new enterprises becomes in this case a diversified conglomerate consisting of various unrelated activities carried out in different markets.
Convergent acquisitions represent a way to look for new activities outside the production chain where the company operated, and to find new directions that take into account its real technological and commercial potential. Such a company remains in the sphere of previous activities, it achieves a synergetic effect and an expansion of the potential market. Integration makes sense when an enterprise intends to increase its profitability by increasing control over its strategically important links in the production chain. It is about establishing various relationships with other elements of the marketing system of the industry, including their acquisition.
Competitive strategies are primarily associated with the work of M. Porter (Figure 4.15).
Fig. 4.15. The model of M. Porter's extended rivalry
The model of competitive forces offered by M. Porter allows enterprises to know and skillfully use its components:
• analysis of the threat of appearance of substitute products;
• Analysis of the threat of new players;
• analysis of the market power of suppliers;
• analysis of the market power of consumers;
• Analysis of the level of competition.
In order to counter existing threats, M. Porter uses the concept of "value chain" (Figure 4.16).
Using a value chain (value added) allows you to choose a competitive strategy in the market (see Figure 4.17).
Fig. 4.17. The general competitive matrix of M. Porter
Product leadership is based on the product differentiation policy. The main attention is paid to improving the goods by giving them greater consumer utility, developing branded products, design, service and warranty service, forming an attractive image, i.e. all those parameters that are included in the company's competitiveness parameter. The main purpose of this behavior of the company is to increase the value of the goods for consumers, which is accompanied by the fact that he is willing to pay a higher price for the product he needs.
The combination of high utility and high chain shapes "market power" goods. It protects the enterprise from competitors, ensures the stability of the situation on the market. The task of marketing in this case is to constantly monitor the preferences of consumers, controlling their "value", as well as the lifetime of the element of differentiation corresponding to this value.
Chain leadership is provided on the basis of the enterprise's ability to reduce production costs. Production plays a dominant role here. Particular attention is paid to investment stability, standardized goods, strict cost management, introduction of rational technologies, cost control, etc. Reducing costs is based on the use of the "experience curve" (the cost of producing a unit of production falls by 20% whenever production is doubled), as well as the inferred "law of experience", which reads as follows: "Cost per unit of output in obtaining value added for a standard product , measured in constant monetary units, are reduced by a fixed percentage for each doubling of output. "
Leadership in a niche is associated with focusing product or price advantage in a narrow market segment. At the same time, the whole market is not covered, but the product or service is preferred, which best corresponds to it.
The final phase of forming a competitive advantage is choosing the company's main line of conduct relative to competitors and evaluating the competitor's reaction to it.
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