SWIN BUR * NE SWINBURNE UNIVERSITY OF TECHNOLOGY SARAWAK CAMPUS Swinburne University of Technology Faculty of Business and Design ACC30009/HBC229N Analysis for Competitive Advantage Lecture 1: Intro to Business Strategy & Competitive Advantage LEARNING OBJECTIVES After working through this topic, you will be able to: 1. Identify the strategic options available to businesses and suggest a generic strategy suitable for a particular industry. 2. Expound on the three tiers of environmental factors affecting contemporary businesses in order to have an appreciation of the way businesses compete. 3. Comprehend how management accounting information relates to strategic choices and appreciate the varied role of management accountants. LECTURE OUTLINE 1. Why focus on strategy; Business level strategy and value proposition; Generic strategies · product differentiation · cost leadership 2. Three tiers of environmental factors affecting the firm · Remote environment · Industry environment o Porter's 5-Force Industry Analysis=> New Entrants; Powerful Suppliers, Powerful Buyers; Substitute Products, Industry Competitors • Operating environment 3. Implications for Management Accounting; The changing role of Management Accountant ESSENTIAL READINGS: . Chapter 4, Pearce and Robinson, 10th edition, pp. 83-114 · Porter, Michael, Notes on Structural Analysis of Industries STRATEGY AND VALUE PROPOSITION Recent changes in the business environment (markets becoming global, sophisticated technology, greater competition and more discerning customers) exacerbate the need to make strategic decisions in order to maximise the firm's competitive advantage. Horngren, Datar and Foster (2006, p. 456) state that strategy 'specifies how an organisation matches its own capabilities with the opportunities in the market place to accomplish its objectives'. An important element of an organisation's strategy is the identification of its target customers and delivering what those customers want. i.e. value proposition. Value Proposition has four elements: 1. Cost 3. Functionality and features 4. Service 2. Quality Two Generic Strategies: 1
1. Product differentiation 2. Cost leadership THE FIRM'S EXTERNAL ENVIRONMENT Factors that more directly influence a firm's prospects originate in the environment of its industry, including entry barriers, competitive rivalry, the availability of substitutes, and the bargaining power of buyers and suppliers. The operating environment comprises factors that influence a firm's immediate competitive situation-competitive position, customer profiles, suppliers, creditors, and the labor market. These three sets of factors provide many of the challenges that a particular firm faces in its attempts to attract or acquire needed resources and to profitably market its goods and services. Environmental assessment is more complicated for multinational corporations (MNCs) than for domestic firms because multinationals must evaluate several environments simultaneously. I. Remote Environment The remote environment comprises factors that originate beyond, and usually irrespective of, any single firm's operating situation: (1) economic, (2) social, (3) political, (4) technological, and (5) ecological factors. > Economic Factors - concern the nature and direction of the economy in which a firm operates and the emergence of international power brokers. a) Because consumption patterns are affected by the relative affluence of various market segments, each firm must consider economic trends in the segments that affect its industry. b) On both the national