Contenido unidad 5 estrategia y ventaja competitiva by jirodriguez

Professor: Juan Rodríguez (PG IBFS).

Business and Strategy

2013.

Juan Ignacio Rodriguez
PG International Banking and Financial Services

¿What is Entrepreneurship?
• Not just small business management
• Not just startups
• Not just for-profit firms

Is the act of creating a new and innovative enterprise

“The pursuit of opportunity beyond the
resources you currently control”

– Howard Stevenson, Harvard Business School-


Some concepts underlying entrepreneurship

Economic theory is concerned with two major questions about
society:
1) ¿How does society create new wealth?
2) ¿How does a Society distribute wealth among its members?


The notion of creative destruction:

The economist Joseph Schumpeter popularized and used the term to describe the
process of transformation that accompanies radical innovation.

In Schumpeter's vision of capitalism, innovative entry by entrepreneurs (Empresarios-
emprendedores) was the force that sustained long-term economic growth, even as it
destroyed the value of established companies that enjoyed some degree of monopoly
power.

By this way, entrepreneurs are individuals who grasp opportunities with the aim to
maximize profits and they did this by unnoticed profit opportunities by being alert to
them.


There are numerous types of innovation-generating creative destruction in an
industry:
• New markets
• New sort of products
• New sort of equipment
• New sources of raw materials
• New methods of management
• New methods of inventory management
• New methods of transportation
• New methods of communication
• New methods of advertising and marketing
• New financial instruments


Sources of value in Business
Physical:
1) Land External
2) Buildings Stakeholders
3) Equipment 1) Creditors
Organization 2) Strategic
4) Inventories Partners
5) Technology 3) Suppliers

Skills
Internal stake
Finance holders
1) Cash Leadership
2) Debt Portfolio Brand Management
1)Employees
3) Financing Strategies
Knowledge 2) Shareholders
4) Investments Values 3) BondHolders
5) Capital Innovation 4)Managers
Systems 5)Board of directors
Process


According to Frank H. Knight (1967) and Peter Drucker (1970)
entrepreneurship is about taking risk.

• The behavior of the entrepreneur reflects a kind of person willing to put his or her
career and financial security on the line and take risks in the name of an idea,
spending much time as well as capital on an uncertain venture. Knight classified
three types of uncertainty.
•Risk, which is measurable statistically
•Ambiguity, risk which is hard to measure statistically
•True Uncertainty or Knightian Uncertainty, which is impossible to estimate or
predict statistically .


A solution to this ambiguity is proposed in; "How to Measure Anything: Finding the
Value of Intangibles in Business“, by Doug Hubbard:

Uncertainty: The lack of complete certainty, that is, the existence of more than one
possibility. The "true" outcome/state/result/value is not known.
Measurement of uncertainty: A set of probabilities assigned to a set of possibilities.
Example: "There is a 60% chance this market will double in five years"
Risk: A state of uncertainty where some of the possibilities involve a loss,
catastrophe, or other undesirable outcome.


Some notes about risk:
An entrepreneur would typically start by asking the following questions:
• Do you understand the market that the product will address and the customer needs that
it will meet?
• Do you think it is a better product than competitor products?
• Do you have a credible team with many of the skills you will need to start your new
venture?
• Do you have any protection for your new idea – copyright, patent, registered design, an
so on?


Building a successful Venture
According to Shuman Ghosemajumder- Stanford University Management
Science & Engineering

The success formula is equal to:

Success = Team + Resources + Strategy
So that everyone should be: 1) Team player, 2) hardworking, 3) Curious
4) Flexible and good at listening

Need have: 1) personal achievers, 2)sales people, 3) creative people, 4) managers
and so on


Key Phrase: added value, sustainable profitability,
what causes industry profitability

Find a different place, different
According to Michael Porter, it is what is going to
market , different way to make
make a particular organization different in other
things with added value by taking
words, it has to be with the creation of a unique sort
into account variables such as:
of value aimed to the customer.
setting up the best practices
(direct distribution, strict cost
control, straight forward client
Strategic positions can be based on customers` communication), product features,
needs, customer accessibility, or even the variety of price, customer service, place,
a company`s products or services warranty an so on


Action Forces - The external environment

Economic

Demographic Socio Cultural
Industry Environment

*Threat of new entrants
*Power of suppliers
*Power of Buyers
*Product Substitutes
Political/Legal *Intensity of rivalry Global

Technological


The General environment: Segments and elements

Demographic segment: Population Size, Age Structure, Geographic distribution,
ethnic mix, income distribution

Economic Segment: Inflation rates, interest rates, trade deficits and surpluses,
budget deficit and surpluses, personal savings rate, Gross domestic product

Political and legal segment: Antitrust laws, taxation laws, deregulation
philosophies, Labour laws, educational philosophies and policies

Socio cultural segment: Women in the workforce, workforce diversity, attitudes
about the quality of work life, concerns about environment, shifts in work and
career preferences

Technological segment: Product innovations, Application of knowledge, New
communication technologies, Research and development expenditures.

Global segment: Critical global markets, Important political events, newly
industrialised countries,.


External Environmental analysis.

An important objective of studying the general environment is identifying
opportunities and threats.

A threat is a condition in the
general environment that may
diminish a company `s efforts
An opportunity is a condition to achieve strategic
in the general environment competitiveness.
that will help a company to
achieve its strategic
competitiveness.


Porter’s Five Forces
Model of Competition

Bargaining
Threat of
power of
new entrants
suppliers

Rivalry Bargaining
among power of
competing
firms buyers

Threat of
substitute
products


Threat of New Entrants

Barriers to entry : Economies of Scale

Product Differentiation

Capital Requirements

Switching Costs

Access to Distribution Channels

Cost Disadvantages Independent of Scale

Government Policy


Bargaining Power of Suppliers

Suppliers are Threat of forward integration in other words it will include
likely to be the control of direct distribution.
powerful if:
Suppliers’ products have few substitutes

Buyer is not an important customer to supplier

Suppliers’ product is an important input to buyers’
product
Suppliers’ products are differentiated

Suppliers’ products have high switching costs


Bargaining power of buyers

Customers are powerful when:

•They purchase a large portion of an industry`s total outputs.

•They could switch to another product at little, if any, cost.

•The industry's products are undifferentiated or standardised

•Buyer has full information.

•Ability to backward integration (To acquired suppliers)


Threat of Substitute Products
Products with
similar function
limit the prices
firms can charge

In Porter's model, substitute products refer to products in
other industries. To the economist, a threat of substitutes
exists when a product's demand is affected by the price
change of a substitute product.


Rivalry Among Existing Competitors
The intensity of rivalry is influenced by the following
industry characteristics:
• A larger number of firms increases rivalry because
more firms must compete for the same customers
and resources.
• Slow market growth causes firms to fight for market
share.
• Low switching costs increases rivalry. When a
customer can freely switch from one product to
another there is a greater struggle to capture
customers.


Kraft Foods lnc.(Company´s
Description)

Kraft Foods Inc. (Kraft Foods); manufactures and markets packaged food products, including
snacks, beverages, cheese and various packaged grocery products.

The Company operates three segments: Kraft Foods North America, Kraft Foods Europe and
Kraft Foods Developing Markets. At December 31, 2009, the Company had operations in more
than 70 countries and made the products at 159 manufacturing and processing facilities
globally.

At December 31, 2009, the Company’s portfolio included nine brands, including Kraft cheeses,
dinners and dressings; Oscar Mayer meats; Philadelphia cream cheese; Maxwell House and
Jacobs coffee; Nabisco cookies and crackers and its Oreo cookie brand; Milka chocolates; and
LU biscuits. On August 4, 2008, Kraft Foods completed the split-off of the Post cereals business
into Ralcorp Holdings, Inc. In February 2010, the Company announced that it has acquired the
control of Cadbury plc.


There is a good gap between stock`s price in 52 week.
Kraft Foods`stock
5 year`s record
Source: Google Finance

A positive trend according to the financials records.
Kraft Foods Index

On the other hand Beta has to be positive

Nasdaq Index


Value Creation for Stock Holders
The combination of Kraft Foods and Cadbury creates a global powerhouse
in snacks, confectionery and quick meals.*

1. The company is the world’s second largest food company with annual revenues of $48 billion.
2. Millions of times a day, in more than 160 countries, consumers reach for their favorite Kraft Foods
brands. On the other hand, in the U.S., KF´s products are present in more than 99 percent of
households.
3. The company proudly market 11 brands with revenues exceeding $1 billion, including: Kraft, Jacobs,
LU, Maxwell House, Cadbury, Trident, Milka, Nabisco and its Oreo brand, Philadelphia, and Oscar
Mayer. Approximately 70 brands have revenues greater than $100 million. More than 40 of our
brands are at least 100 years old.
4. More than 80 percent of the company revenues come from products that hold the No. 1 share
position in their respective categories.
5. The company is making the difference by fighting hunger and supporting healthy lifestyles. Over the
past 25 years, KFT have donated nearly a billion dollars in cash and food.
6. Finally, KFT is a member of the Dow Jones Industrial Average and Standard & Poor’s 500.


Bibliografía
HITT, IRELAND and HOSKISSON. Strategic Management. International
Student Edition. THOMPSON. 6th Edition. 2005.
MASTFERN, RICART and VILA. Dirección Estratégica. Biblioteca IESE de
Gestión Empresarial. Folio. 2000
RESTREPO, Luis. Interpretando a Porter. Colección de textos de
Administración y Negocios. Facultad de Administración. Editorial Universidad
del Rosario. 2004.


Cibergrafìa
Análisis fuerzas competitivas Michael Porter:
http://youtu.be/oc-oNMLKhzI
HSM inspiring Ideas:
http://www.youtube.com/watch?v=0E0e6NqcT0M&feature=youtu.be
Google Finance:
https://www.google.com/finance?q=NASDAQ%3AKRFT&ei=UsM8UcCOEK
eElAOTpQE


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