Table of Content
1. Introduction 4
1.1. Problem outline 4
1.2. Objective of the assignment 4
1.3. Data collection methods and information sources 4
1.4. Theoretical Concepts Used in Assignment 5
1.4.1. Hierarchy of Strategic Management 5
1.4.2. Corporate Strategy 6
1.4.3. Business Strategy 6
1.4.4. Functional Strategy 6
1.4.5. Scheme of formulation RD Strategy 6
2. Identification of strategies 7
2.1. Company Introduction 7
2.2. Corporate Strategy 8
2.3. Business strategy 9
2.4. R&D Strategy 11
3. Analyses 12
3.1. Analysis of upper level 12
3.2. Stakeholder Needs Analysis 13
3.3. External Common Environment Analysis - SLEPT 13
3.3.1. Socio-cultural aspect 13
3.3.2. Legal aspect 14
3.3.3. Economic aspect 14
3.3.4. Political aspect 14
3.3.5. Technological aspect 14
3.4. External Branch Environment Analysis - PORTER 14
3.4.1. Threat of entry of new competitors. 15
3.4.2. Threat of substitutes. 16
3.4.3. Bargaining power of buyers. 17
3.4.4. Bargaining power of suppliers.
17
3.4.5. Competitive rivalry within the industry. 18
3.5. Internal Environment Analysis 18
3.5.1. Material provision for R&D 19
3.5.2. Product and technology development 19
3.5.3. Human Resources for R&D 19
3.5.4. Motivation for R&D Human Resources 19
3.5.5. Financial Resources for R&D 19
3.5.6. License politics 19
3.5.7. Co-operation with research institutes and universities 20
3.5.8. IS/IT support for R&D 20
3.5.9. Summary 20
3.5.9.1. WEAKNESS 20
3.5.9.2. STRENGTHS 20
3.6. SWOT Analysis 20
4. Formulation of R&D strategy 22
4.1. Most importent strategic aims for R&D 22
4.2. Strategic aims for each important aspects of strategies 22
4.2.1. Material provision for R&D 22
4.2.2. Product and technology development 22
4.2.3. Human Resources for R&D 22
4.2.4. Motivation for R&D Human Resources 22
4.2.5. Financial Resources for R&D 22
4.2.6. License politcs 22
4.2.7. Co-operation with research institutes and universities 22
4.2.8. IS/IT support for R&D 22
4.3. Recommendation for R&D Strategy implementation 23
5. Conclusion 24
6. Bibliography 25
7. List of Pictures and Tables 25
1. Introduction
1.1. Problem outline
The studies for the MBA SE module Strategic Marketing include an assignment to assume the role of a consultancy company and to apply the selected concept of strategic management on the case study of Moravský denÃÂk a.s, and to elaborate the methods for identification, analysis and determining of a new mission, vision, and corporate, business and functional strategy.
1.2. Objective of the assignment
Main objective of this assignment is to give management of Moravský denÃÂk, a.s. methodological instruction (step-by-step handbook) how to formulate RD Strategy. In following chapters I will try to describe main aims and objectives of assignment and theoretical concepts which I have chosen to explain main principles of formulation RD Strategy for Moravský denÃÂk, a.s.
1.3. Data collection methods and information sources
This assignment has been elaborated using the relevant information sources and methods, including above all:
Sources:
Case study "Moravský denÃÂk" by Ing. Jan Hà ¯la (lit. [1]).
Internet
Discussion with Ing. Hà ¯la at the lecture on 9.1.2005
Assignments of environment of our colleagues
Methods and procedures:
Collecting relevant data and facts
Interviews, email and telephone communication and deduction for identification and analysis
Selecting information from obtained case study (lit. [1])
Identification together with methodology with uncured information
Analysis (SLEPT, PORTER, SWOT)
1.4. Theoretical Concepts Used in Assignment
As theory base was used the B.I.B.S. concept of Strategic Management (lit. [2]).
1.4.1. Hierarchy of Strategic Management
Picture no.1 - Hierarchy of Strategies
1.4.2. Corporate Strategy
Corporate Strategy expresses basic company decisions, such as in which branch of industry will company carry on business, how will be company managed, how owner allocate enough capital etc.
On the one hand Corporate Strategy develops company's mission and vision and on the other hand is command for relevant business strategies (lit. [3]).
1.4.3. Business Strategy
Business Strategy expresses strategic objectives for particular strategic business unit (SBU1) (lit. [3]).
1.4.4. Functional Strategy
Functional Strategy provides important areas of company (Production, Finance, Marketing, HR and RD) according to whole strategic development of company (lit. [3]).
1.4.5. Scheme of formulation RD Strategy
As theory base was used the BIBS concept of functional strategy. The following scheme is presenting the theory of this assignment (lit. [2]):
Picture no. 2 - R&D Strategy
2. Identification of strategies
2.1. Company Introduction
The company (publishing house) Moravský denÃÂk a.s., which is the object of this work, has originated as many others by transformation of a state company to a joint-stock company. The first owners (shareholders) at the time of its origination in 1991 were its employees. With foreign investors coming and going, there had been totally three significant publishing houses as owners. The first owner was a publishing company from France that had owned the publishing house from 1992 to 1995. Its equity share was bought at the end of 1995 by a publishing house from Düsseldorf (Germany). After six years, this publishing house has sold the rights of publication owing to poor economic results of the company to the current owner, a regional newspaper publisher from Passau (Germany).
Each of the publishing houses had a different company strategy, a different organizational structure, as well as a different company culture. These relatively frequent exchanges of owners and the ensuing changes were laying high demands on the employees of the publishing house, which was felt in the achieved results.
The current owner differs from the previous two mainly by having nearly ten years of experience with publishing regional newspapers in the Czech Republic. It has entered the Czech newspaper market at the beginning of 1991. The newspapers published by this publishing house have the trade name DenÃÂky Bohemia and they lead the newspaper market in the Czech Republic both in the circulation and the number of readers, i.e. data that are audited and have a fundamental influence on the successfulness with advertising clients.
Considering the fact that our new owner has bought more newspaper titles together with out company, they have decided to first merge some titles and then start building a prosperous publishing house. During the merging, some newspaper titles have ceased to exist whose economic results were poor and whose sold number of copies and prospective of further development were not promising. This step has lead to partial relaxation in the newspaper market, which has significantly increased the chances of all publishers for their further promising development.
At the end of 2001, new management has come the individual joint-stock companies. Its main aim was to:
Change the existing organizational structure and adapt the systems of management to the parent company model (VLP a.s.).
Prepare the plan of savings based both on the new organizational structure and on new processes of newspaper production. Use synergic effects between individual joint-stock companies to maximize profits and obtain the largest possible market share in the print media market.
Form new work teams and start immediately laying the foundations for new company culture that would provide support for the changes in progress and help lay the foundations for a future prosperous publishing house.
Prepare proposals for the use of free financial means for development investments or investments in new areas (lit. [1]).
2.2. Corporate Strategy
Vision of the company is to be the dominant newspaper publisher and supplier of advertising space in the region.
Company mission:
We want to supply the latest and most objective information from the world, the country, the region, as well as the immediate surroundings to all inhabitants of the region.
We want to address readers of the daily not only in large cities but also in the smallest villages.
We want our newspaper to be the strongest title in the South Moravia region and in Brno.
We want our newspaper to become the best selling title in the South Moravia region and in Brno.
We want to become the largest supplier of newspaper advertising space.
Based on vision and mission of the company we can identified a strategic business units SBUs:
SBU 1 - Newspapers (dailies, weeklies)
SBU 2 - Advertising
Identification SBUs applying the organizational and strategic-marketing view:
SBU 1. Dailies,
SBU 2. Weeklies
SBU 3. Advertising
And the third one (SBU3) identified by the strategic-marketing view "going crosswise".
Basic strategic objectives for SBUs:
SBU 1 - Newspapers:
Profit maximization
Increasing the sales
Market share maximization
SBU 2 - Advertising:
Profit maximization
Increasing the sales
Market share maximization
2.3. Business strategy
The business strategy primary follows principles of Corporate strategy and its definition of SBU.
Business strategy is defined use B.I.B.S. concept. It is mean we form it 7P for each SBU:
SBU 1 - Newspapers:
Product - Publishing of dailies and the weeklies newspapers
Place - South Moravia region, not only big cities (like a Brno), but focus on small cities and the villages
Price - The company is a price acceptor for target group. They need to decrease the raw material prices (etc. paper).
Promotion - How to better communicate to target group. More than 50% of readers are older than 60 years. They need to be addressable for younger readers.
Process - Change the organizational structure by the mother format (Vltava-Labe-Press a.s.). Make a synergy effects in shared resources of manufacture process.
Planning - Prepare plan for reduce a costs. Use synergy effects with others titles in the group. Share articles. Use free money resources for developing investment and reinvestment.
People - Set up new working teams. Built up new and strong firm culture for following strategic plans.
SBU 2 - Advertising
Product - Performs activities aiming at increasing the sales in advertising.
Place - South Moravia region, not only big cities (like a Brno), but focus on small cities and the villages
Price - The company is a price acceptor for target group. They need to decrease the raw material prices (etc. paper).
Promotion - How to better communicate to target group.
Process - Change the organizational structure by the mother format (Vltava-Labe-Press a.s.). Make a synergy effects in shared resources of processes.
Planning - Prepare plan for reduce a costs. Use synergy effects with others titles in the group. Share advertise. Use free money resources for developing investment and reinvestment.
People - Set up new working teams. Built up new and strong firm culture for following strategic plans (lit. [4]).
2.4. R&D Strategy
R&D as a functional strategy needs identify if will be write for each SBU or if will go cross wide. Because from information the current R&D strategy doesn't exist, decision for next steps is follow result of Business Strategy. It means that 7P are close similar for SBU1 (Newspapers) and SBU2 (Advertising) than R&D Strategy will cover both SBUs as cross wide Functional Strategy.
3. Analyses
This scheme simply describe structure of analysis which are recommend to use for RD Strategy formulation (lit. [2]).
Picture no.3 - Structure of analysis
3.1. Analysis of upper level
Analysis of upper level in context with corporate strategy means analyse of Business Strategy (lit. [5]).
3.2. Stakeholder Needs Analysis
If we want successful RD Strategy it is important to create strategy which matches expectations of stakeholders.
It is recommend the power of particular stakeholders organize in table form, with the aid of points express their power and evaluate their influence on RD process (lit. [6]).
Stakeholders Expectations Goals Reasons of the power Evaluation of the power
Owners
Management
Employees (sales and marketing personnel)
Trade unions
Customers
Competitors
Table no.1 - Chart of stakeholders analyse
3.3. External Common Environment Analysis - SLEPT
It is used as part of strategic analysis of external common environment. It is an analysis of five aspects of this environment, namely Social, Legal, Economical, Political, and Technological (SLEPT).
What is to be followed, as part of the above-mentioned four aspects of external environment cannot be clearly specified on the general level because it is closely connected to the object of the strategy. We can however say for illustration that the following spheres can be included:
3.3.1. Socio-cultural aspect
Demographic structure
Distribution of income
Mobility
Level of education
Lifestyle
3.3.2. Legal aspect
Corruption
Regulation of import and export
Tax policy
Protection of economic competition
3.3.3. Economic aspect
HDP development trend
Supply of money
Exchange rates
Inflation
Unemployment
3.3.4. Political aspect
Government stability
Credibility of business environment
3.3.5. Technological aspect
New discoveries, inventions and patents
Technology transfer
Obsolescence rate of means of production
The aim of the SLEPT analysis is to find the factors that within the time horizon of the strategy will significantly influence its object and can thus play the roles of opportunities for or threats to fulfilling the strategic objectives (lit. [7]).
3.4. External Branch Environment Analysis - PORTER
This is an overall approach to the analysis of external environment rather than a partial method. This analysis formulated by M. Porter defines five competitive powers that have to be taken into consideration by a company performing a strategic analysis. They are the threat of entry of new competitors, the threat of substitutes, the bargaining power of buyers, the bargaining power of suppliers and competitive rivalry within the industry (lit. [8]).
Picture no. 4 - Porters model of 5 competitive forces
3.4.1. Threat of entry of new competitors.
Newly entering companies bring to the industry new capacity, effort to obtain a share of the market, and often large financial means. This can lead to price squeezing or to a rise in costs and the ensuing decrease in profitability. The threat of entry of new competitors depends on entry barriers and the reaction of companies already established in the market.
When analysing entry barriers, the following has to be considered:
To what extent volume of production influences costs;
Customer loyalty to existing companies;
Amount of capital intensity of entering the industry;
Amount of costs connected to customer's switch from one supplier to another;
To what extent the company attempting to enter the industry can use existing distribution channels;
What advantages the established companies have as opposed to the companies trying to enter the industry (e.g. know-how covered by patents or trade secret, experience from long-term production, advantageous access to raw materials etc.).
When predicting the reaction of companies established in the industry to potential entry, the following has to be taken into consideration:
Past experience with retaliation to newly entering companies;
The resources the established companies have available for retaliation;
The rate of growth of the industry as a factor influencing the ability to absorb the production of a new company.
3.4.2. Threat of substitutes.
A substitute is a product from a different industry that can fulfil the same function as the product of the industry in question. Substitutes limit potential earnings in the industry by establishing price ceilings the companies within the industry can reach. The impact of substitutes influences the overall elasticity of demand within the industry. The substitutes that deserve the most attention in the strategic analysis are those whose improving price position allows them to approach the production of the industry or which are made by industries that are highly profitable.
3.4.3. Bargaining power of buyers.
Buyers compete with the industry by putting prices down, attempting to obtain better quality of products and by setting competitors against each other. All this at the cost of industry profitability. The bargaining power of buyers is high if:
They buy a large amount in relation to the total volume of sale of the supplier;
The products they buy in the given industry represent a significant share of their costs;
The products they buy are standard or undifferentiated;
They are not threatened by high costs connected to switching from one suppler to another;
They realize low profits (low profit creates strong stimuli for cutting input costs);
They are able to form a considerable threat of backward integration;
The industry product is not important from the point of view of quality of the buyer's production;
They are fully informed about the demand, market prices or supplier's costs.
3.4.4. Bargaining power of suppliers.
Suppliers compete with the industry by trying to increase prices or decrease quality. Influential suppliers can thus in their industry that is unable to neutralize the growing costs increase profitability by increasing their own prices. The bargaining power of suppliers is high if:
They are more concentrated than the company to which they supply;
They don't have to face substitutes;
The company to which they supply is not their important buyer;
Their product is an important input for buyer's activity;
The set of suppliers has differentiated production;
The buyer faces high costs connected to switching to a different supplier;
They are able to form a considerable threat of integration in the buyer's industry.
3.4.5. Competitive rivalry within the industry.
The reason for rivalry is that one or more competitors either feel a pressure or see an opportunity to improve their position. In most cases the competitive steps by one company have a visible impact on the rival companies and they can provoke retaliation or attempt for neutralization.
Competitive rivalry is intensive if:
Rival companies are numerous, approximately of the same size and strength;
The rate of growth of the industry is low and increasing the market share is only possible at the expense of a rival;
Fixed costs are high, which leads to the necessity of maximum gain from the capacities;
Products are not differentiated;
New capacities have to be created abruptly for technical or economic reasons;
The barriers to leaving the industry are high;
Competing companies are unable to agree on the rules of competition, much less on cooperation.
The aim of the analysis of competitive forces within the industry is to comprehensively assess the position of the analysed company in an environment of conflict of all rival subjects.
3.5. Internal Environment Analysis
Science technological research and development is not done within company, because technological devices are only utilized as production tools and not researched and developed. Science technological development outside of company is very carefully observed, what means latest trends in all necessary areas. There is mainly investigated development of newspapers layouts, what means how the newspapers will be done on the technological level in the short future (lit [8]).
This analyse should bring as outputs the strengths and weakness of the company. So we should analyse the situation inside company and prepare to formulate R&D strategy.
3.5.1. Material provision for R&D
This chapter should bring analyse of material provisioning and make decision if it strengths or weakness. We have to find the sources of this state.
3.5.2. Product and technology development
This chapter should bring analyse of product and technology development and make decision if it strengths or weakness. We have to find the sources of this state.
3.5.3. Human Resources for R&D
This chapter should bring analyse of human resources and make decision if it strengths or weakness. We have to find the sources of this state.
3.5.4. Motivation for R&D Human Resources
This chapter should bring analyse of motivation of HR and make decision if it strengths or weakness. We have to find the sources of this state.
3.5.5. Financial Resources for R&D
This chapter should bring analyse of financial resources and make decision if it strengths or weakness. We have to find the sources of this state.
3.5.6. License politics
This chapter should bring analyse of license politics and make decision if it strengths or weakness. We have to find the sources of this state.
3.5.7. Co-operation with research institutes and universities
This chapter should bring analyse of Co-operation with research institutes and universities and make decision if it strengths or weakness. We have to find the sources of this state.
3.5.8. IS/IT support for R&D
This chapter should bring analyse of IS/IT support and make decision if it strengths or weakness. We have to find the sources of this state.
3.5.9. Summary
The summary should make list of weakness and strengths. It means that we can investigate for example if R&D are supported by Human Resources, Financial Resources or IS/IT resources.
3.5.9.1. WEAKNESS
Motivation system for R&D people
Problematic license politics
...
3.5.9.2. STRENGTHS
10% of free financial sources invest to R&D
Well support by IS/IT
...
3.6. SWOT Analysis
This method serves to identify the:
Strengths
Weaknesses
Opportunities
Threats
Strengths Weaknesses
+ 10% of free financial sources invest to R&D - Motivation system for R&D people
+ Well support by IS/IT - Problematic license politics
+ -
+ -
Opportunities Threats
+ ... - ...
+ -
+ -
+ -
Table no. 2 - SWOT chart
The SWOT analysis can serve for the synthesis of results of application of other methods of strategic analysis of external and internal environment and to generate strategic variations. By arranging the above-mentioned elements in a four-quadrant matrix, the following four basic strategy variations can be generated:
SO strategies are strategies using the company's strengths to evaluate opportunities identified in the external environment
WO strategies are oriented at elimination of the company's weaknesses by using opportunities in the external environment
ST strategies can be applied if the company is strong enough for direct confrontation with threats
WT strategies represent protective strategies, oriented at eliminating the weaknesses and avoiding threats from the outside (lit. [2]).
4. Formulation of R&D strategy
Based on the SWOT information we have to formulate proposals and build them up to the R&D strategy.
Now we have all necessary information to complete and formulate R&D strategy. We know what is the weakness, strengths, threats and opportunity. Our R&D strategy should be built up from the knowledge of those four above presented groups (in SWOT).
4.1. Most important strategic aims for R&D
All the strategic aims, formulated here, have to be in SMART form. SMART means (lit. [2]):
S - stimulating (aims must be stimulating for the best results),
M - measurable (aim must be measurable),
A - acceptable (even the people, who will carry out aims should accept them),
R - realistic (is it possible?),
T - timed (we should fix a term),
4.2. Strategic aims for each important aspects of strategies
4.2.1. Material provision for R&D
4.2.2. Product and technology development
4.2.3. Human Resources for R&D
4.2.4. Motivation for R&D Human Resources
4.2.5. Financial Resources for R&D
4.2.6. License politics
4.2.7. Co-operation with research institutes and universities
4.2.8. IS/IT support for R&D
4.3. Recommendation for R&D Strategy implementation
The last and important step is to implement strategy. Considering that company Moravský denÃÂk, a.s. exists in dynamic environment is very important quick and success implementation of R&D Strategy.
Implementation has to be realized through several plans. This plans will be short-time, middle-time or long-time. For better implementation I can recommend Project Management.
Realizing that external environments change, R&D strategies need to be updated to meet future international competition. Changes in the environment causing the most difficulty in the implementation of present R&D strategies include the following: government regulations, taxation controls such as expensing R&D, people shortage, housing cost, turnover, and training; increased costs of money and material for R&D; advancement of technology and education; short product lifetimes; and market environment changes such as high tech substitutions and market shifts. Overseas competition has specifically affected the need for R&D and cost reduction through international pricing pressure.
Shorter product life cycles have also caused a drastically increased need for revision of R&D strategies. In the future, both engineering and marketing should agree on all specifications after demonstrating that there is at least one way to satisfy them. Manufacturing must also participate in the establishment of overall R&D strategy. Sustaining engineering and project maintenance should be removed from the primary R&D team since they do not have time to do R&D and engage in significant sustaining engineering programs.
There is a great deal of external and internal restructuring going on. To stay at the forefront of technology, companies need to make consistent investments in new R&D. Incremental market-led product innovation is not sufficient when major competitive technological leaps are occurring.
Continual product development is an effective, competitive economic weapon. One should aim at staying ahead of present new product developments in order to alert the total business to threats and opportunities associated with new technological shifts. Improved R&D education can also provide for success as it is channelled into more effective future R&D strategies (lit [9]).
5. Conclusion
This assignment has only one important objective, to create step-by-step handbook of R&D strategy. As we can see above, all the necessary information was written and explained. The Management of company "Moravský denÃÂk" can use this assignment as a handbook for formulation real and success R&D strategy.