I. Essentials of Strategic Planning: What Works, What

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1 Agenda and Outline I. Essentials of Strategic Planning: What Works, What Doesn t, and How Can I use my Plan to Drive II. Case Analysis: Strategic Thinking and Execution Porter Airlines III. Competition and Growth in 3 Circles: Building a Growth Strategy IV. Innovation Innovating Without an R&D Budget V. So Many Options, So Little Time, What s Next Frameworks for Project Selection VI. Strategic Foresight Getting Future Ready Through Scenario Development VII. Application Breakout: Developing Your Future Scenarios

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3 Are You Sure You Have a Strategy? Arenas Staging Economic Logic Vehicles Differentiators Don Hambrick Jim Fredrickson D. Hambrick & J. Fredrickson, 2001 Academy of Management Perspectives

4 Are You Sure You Have a Strategy? Speed and sequence of moves? Speed of expansion Sequence and order of initiatives Staging Arenas Economic Logic Where will be active? Which product categories Which market segments Which geographic areas Which value-chain stages Vehicles How will we get there? Internal development Joint ventures Acquisitions Channels How will we obtain our returns? Low cost & scale advantages Low cost & replication Premium prices due to service Premium prices with product features and performance Differentiators How will we win? Image Customization Price Styling Performance Product reliability

5 Porter Airlines Breakout teams Team 1 Team 2 Team 3 Assess Porter s position with regard to buyer and supplier power. (Five Forces Framework) Assess Porter s position with regard to substitutes. (Five Forces Framework) Describe/Identify Porter s Arenas? (Strategy Diamond) Team 4 Describe/assess Porter s Economic Logic? (Strategy Diamond) Team 5 Describe/assess Porter s use of staging?? (Strategy Diamond) Team 6 Team 7 Team 8 Was Robert DeLuce, Porter s Founder and CEO, merely lucky or a brilliant strategist? How sustainable is Porter s position? What happens if Air Canada reenters? How can Porter grow and expand?

6 Environmental Scan: Competitive Environment Porter s Five Forces That Shape Industry Competition Threat of New Entrants Bargaining Power of Suppliers Rivalry Among Existing Competitors Bargaining Power of Buyers Threat of Substitute Products or Services Source: M.E Porter, The Five Competitive Forces That Shape Strategy, HBR 2008

7 Porter s Five Forces That Shape Industry Competition Intensify Rivalry Slow demand growth Numerous equally balanced competitors High fixed costs Low product differentiation & switching costs High strategic stakes High exit barriers Threat of New Entrants Deter New Entry Economies of scale Product differentiation Capital requirements Switching costs Access to distribution Threat of retaliation Slow growth Bargaining Power of Suppliers Strengthen Suppliers Few suppliers Supplier s product is differentiated High switching costs Critical input for buyer Credible threat of forward integration Substitutes Products from related industry meeting similar need Price ceiling Changing nature of price performance Rivalry Among Existing Competitors Threat of Substitute Products or Services Bargaining Power of Buyers Strengthen Buyer Power Few buyers relative to suppliers Purchases large volume Undifferentiated commodity Low switching costs Buyers are very knowledgeable Credible backward integration

8 Porter Airlines Route Map

9 Porter vs. WestJet 923 mi $1,000 $800 $ mi $400 $200 $166 $162 $0 Revenue per Passenger Porter Average Flight Length WestJet

10 Pedestrian Tunnel From Billy Bishop to Downtown

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12 Billy Bishop Airport extend 200m on each end

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15 Porter Airlines Gate Slots at Billy Bishop (TCCA) in 2015 Porter Airlines 156 slots Air Canada 30 slots (only flies to Montreal) Porter flies: 14 round trips daily between Toronto and Montreal 12 round trips between Toronto and New York. 5 round trips between Toronto and Chicago Break even load factors Porter Airlines 49% WestJet 71% Southwest 74% Porter planning to purchase 30 Bombardier CS100 jets. Interline agreements with Qatar Airlines, South African Airways, Singapore Airlines, Jet Blue

16 Porter Airlines: Summary Industry analysis powerful tool for assessing strategy and profit opportunities Example of how in a viciously cutthroat industry amongst much larger competitors, a firm can carve out a unique and distinctive position to protect from Porter s 5 Forces. Example of a company capitalizing on transitory business opportunity to develop a business model to defend its position. Identifying valuable resources that others overlook or undervalue. Challenging industry orthodoxy Demonstrates the value of collaborative opportunities helping another solve their problems (Toronto Port Authority) may enable you to enlist their help solving your problems or capturing opportunities.