Key Management

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Key Administration/Business Approach. Power Point Set #8: Aggressive Motion: Genuine Choices. Focused Progress. Focused flow: results from a progression of aggressive activities and aggressive reactions among firms contending inside of a specific industry.

Presentation Transcript

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´╗┐Key Management/Business Policy Power Point Set #8: Competitive Dynamics: Real Options

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Competitive Dynamics Competitive elements: comes about because of a progression of aggressive activities and focused reactions among firms contending inside a specific industry. Shared reliance : comes about when organizations perceive that their procedures are not actualized in disengagement from their rivals' activities & reactions. Eastman Kodak and Fuji Film , for instance, keep on engaging in a progression of aggressive activities and reactions with an end goal to build up upper hand.

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Competitive Dynamics A first mover is a firm that makes an underlying aggressive move. Fruitful activities permit a firm to gain better than expected monetary returns until different contenders can react viably. What's more, first movers have the chance to pick up client dedication. For example, Harley-Davidson has possessed the capacity to keep up a focused lead in expansive bikes because of extreme client reliability.

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Competitive Dynamics A first mover confronts potential burdens : High hazard; High improvement expenses; and High request vulnerability

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Competitive Dynamics A " second mover" is a (moment, third, fourth, and so forth.) firm that reacts to a first mover's focused activity frequently through impersonation or a move intended to counter the impacts of the underlying activity. BankOne was a quick second mover in Internet managing an account. New Balance is an effective second mover in the athletic shoe industry.

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Competitive Dynamics Second mover points of interest include: Reduction sought after vulnerability; Market research to enhance fulfilling client needs; Learn from the primary mover's triumphs and deficiencies; and Gaining time for R&D to build up a prevalent item

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CF + time - Scenario Analysis - The Relationship Between Finance & Strategy Traditional Evaluation Of Financial Projects Net Present Value or Discounted Cash Flow Analysis

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Scenario Analysis - The Relationship Between Finance & Strategy Differences Between Strategy and Finance: Finance : Payoffs are resolved exogenously or by chance Strategy : Our activities influence the monetary settlements we are probably going to experience Decision-Theoretic Vs. Amusement Theoretic Analysis : Games against "Nature" Vs. Diversions against other individuals

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Trigeorgis (1997): Real Options A hypothetically precise NPV examination ought to incorporate genuine alternatives values. The asymmetry getting from having the privilege yet not the commitment to practice a choice is at the heart of the genuine alternatives esteem. Directors making speculations under instability can make financial incentive by working in adaptability, since adaptability has monetary esteem . Genuine Options: Managerial Flexibility and Strategy in Resource Allocation

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Real Options Nucor Steel Mini-process Stand-alone venture: NPV = - $50 million Abandonment Option: High (Low sunk cost) Growth Option: High (Follow-on speculations

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Price = $300 Price(t=1) = $300 .5 Price(t=0) = $200 .5 Price = $100 Price(t=1) = $100 Commitment Versus Flexibility - The Value of Time Cost to Build Plant = $1600 Cost of Capital = 10%

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Commitment Versus Flexibility - The Value of Time

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Competencies and Strategic Flexibility Strategic adaptability is similar to "having choices" and responsibility is closely resembling the "activity of a choice." The more noteworthy the vulnerability the firm faces, the more profitable are its genuine choices . The determination of instability after some time is the impetus which incites a director to make (sunk cost) responsibilities.