Strategy Analyzing & Preparation (part1)

Goals of This Class Where are we? What do you expect from this class? Overview of telecommunication strategies What do you expect from this class? Step by step to know how to analyze those telecom firms and formulate strategies Follow the textbook proposed framework to analyze a telecom firm from formulation to evaluation KuangChiu Huang

Outline of the Lecture What is a firm’s strategy? Process and nature strategy formulation Financial and strategic objectives Types of strategies Review some financial index KuangChiu Huang

The Process of Strategy Formulation Vision Mission Objectives External audit (OT analysis) Internal audit (SW analysis) Past successful strategies Alternative strategies (new strategies) KuangChiu Huang

The Nature of Strategy Formulation Establishing long-term objectives Generating alternative strategies Selecting strategies to pursue Best alternatives (achieve mission and objectives) KuangChiu Huang

A Comprehensive Strategic Management Model Formulation Implementation Evaluation Integrate observation & previous info Vision Measure financial & strategic figures Mission Objectives Strategy KuangChiu Huang

Financial versus Strategic Objectives Which one is more important? Financial objectives Growth in revenues Growth in earnings Higher dividends Higher profit margins Higher earning per share Improve cash flow KuangChiu Huang

Financial versus Strategic Objectives Larger market share Better QoS than rivals Quicken time-to-market than rivals Lowers costs than rivals Wider network coverage than rivals KuangChiu Huang

Financial versus Strategic Objectives: Tradeoffs & Contradictions Maximize short-term financial objectives could harm long-term strategic objectives Pursue increased market share at the expense of short-term profitability (Promotion, MOD and many others) Tradeoffs related to risk of actions, business ethics, social responsibility issues, preserve natural environment Ask students to provide some examples about Maximize short-term financial objectives could harm long-term strategic objectives KuangChiu Huang

Reverse Thinking: What Are not Strategic Objectives? Managing by crisis Managing by subjective Managing by hope KuangChiu Huang

Corp Level Division Level Functional Level Operational Level Types of Strategies: A Large Company Corp Level Division Level Functional Level Operational Level KuangChiu Huang

Types of Strategies: A Small Firm Company Level Functional Level Operational Level KuangChiu Huang

Types of Strategies: Classification Product development intensive Market development Market penetration Offensive Related Diversification Unrelated integration Vertical: backward Retrenchment Defensive could take Fitel as a suitable example “WiMAX and PHS” Vertical: forward Divestiture Defensive Horizontal Liquidation KuangChiu Huang

Comprehensive Strategy-Formulation Framework Stage 1: The Input Stage Stage 2: The Matching Stage Stage 3: The Decision Stage KuangChiu Huang

Strategy-Formulation Analytical Framework Input stage External Factor Evaluation (EFE) Internal Factor Evaluation (IFE) Competitive Profile Matrix (CPM) Matching stage SWOT BCG IEM SPACE GRAND Decision stage Quantitative Strategic Planning Matrix (QSPM) KuangChiu Huang

Strategic Figures Market share for its main services Growth ratios in market share Churn rates ARPU KuangChiu Huang

Financial Figures Liquidity ratio: Leverage ratio: Activity ratio: Profitability ratio: Growth ratio: KuangChiu Huang

Liquidity Ratio Current ratio: Quick ratio: Current Assets/Current Liabilities Quick ratio: Current assets minus inventory / Current liabilities KuangChiu Huang

Leverage Ratios Debt to Total Assets Ratio: Total Debts/ Total Assets Debt to Equity Ratio Total Debts/ Total Shareholder’s Equity Long-Term Debt to Equity Ratio Long-Term Debts/ Total Shareholder’s Equity Times-Interest-Earned Ratio EBIT/ Total Interest Charges KuangChiu Huang

Activity Ratios Fixed Assets Turnover: Sales/Fixed Assets Total Assets Turnover: Sales/Total Assets Account Receivable Turnover: Annual Credit Sales/Accounts Receivable Average Collection Period: Accounts Receivable/(Total Credit Sales/365) KuangChiu Huang

Profitability Ratios (1) Operating Profit Margin: EBIT/Sales Net Profit Margin: Net Income/Sales (After-tax profits) Return on Total Assets (ROA): Net Income/Total Assets KuangChiu Huang

Profitability Ratios (2) Return on Stockholder’s Equity (ROE): Net Income/Total Stockholder’s Equity Earnings per Share (EPS): Net Income/# of outstanding common shares Price-Earnings Ratio: Market Price per Share/Earnings per Share KuangChiu Huang

Growth Ratios Sales: Annual % growth in total sales Net Income: Annual % growth in profits EPS: Annual % growth in EPS Dividends per Share: Annual % growth in dividends per share KuangChiu Huang

Thank You! My contact information: Email: kuangchi@mail.ncku.edu.tw Office: R62509 Telephone number: 06-2757575-53229 KuangChiu Huang