Sunday, January 31, 2010
Thursday, January 28, 2010
Another Interesting Value Chain Analysis Video
There are opportunities for improvement in all organisations and all value chains. The problem is that all too often organisations (or at least the people that manage them) are reluctant to accept the principle of continuous improvement, or believe it applies only to other organisations with whom they interact and not themselves! Value chain analysis (VCA) is a DIAGNOSTIC TOOL that provides a mechanism for drawing the attention of different stakeholders to the opportunities for improvement at different stages in the value chain, and can be an effective catalyst for change.
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(University of Kent)
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(University of Kent)
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Monday, January 18, 2010
Sunday, January 17, 2010
Thursday, January 7, 2010
Porter's 5 Forces Explained
Porter’s Five Forces analysis applies to industry sectors.
All businesses in a particular industry are likely to be subject to similar pressures that determine how attractive the sector is.
As with PEST analysis, Porter’s five forces model can be used to identify critical success factors (CSF) and for ongoing monitoring of key issues affecting competitive advantage.
If businesses are able to, they should:
• Avoid business sectors which are unattractive because of the five forces.
• Try to mitigate the effects of the five forces. For example, supplier power is lessened if a long-term contract is negotiated; competition is reduced by taking over a rival.
(source: Kaplan Publishing)
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All businesses in a particular industry are likely to be subject to similar pressures that determine how attractive the sector is.
As with PEST analysis, Porter’s five forces model can be used to identify critical success factors (CSF) and for ongoing monitoring of key issues affecting competitive advantage.
If businesses are able to, they should:
• Avoid business sectors which are unattractive because of the five forces.
• Try to mitigate the effects of the five forces. For example, supplier power is lessened if a long-term contract is negotiated; competition is reduced by taking over a rival.
(source: Kaplan Publishing)
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Saturday, January 2, 2010
Maximin, Maximax and Minimax Regret Decision Criteria/Rules
Decision makers may use any one of the above criteria to make decisions in the following situations:
• Where probabilities are available but the decision maker is not interested in average, long-run values (expected values) but on actual one-off outcomes.
• Where it is not possible to assign meaningful probabilities to alternative courses of action.
The criterion used by the decision maker will be dependent upon his risk attitude:
• Risk seeker management will use maximax rule
• Risk averter management will use maximin rule
• Risk neutral management will use minimax regret rule
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(1) Maximax Rule
It is a strategy which maximizes the maximum gain.
A risk seeker manager using the rule will select the option with the largest payoff based on the assumption that the best possible outcome will occur for all the available options.
(2) Maximin Rule
It is a strategy which maximizes the minimum gain (or minimizes the maximum loss)
A risk averse manager using this rule will select the option with the largest payoff based on the assumption that the worst possible outcome will occur for all the available options.
(3) Minimax Regret Rule
It is a strategy which seeks to minimize the maximum possible regret ie opportunity cost that will be incurred as a result of having made the wrong decision (e.g. contribution/profit/cost savings forgone). The opportunity cost associated with each decision option will be summarized in a regret matrix (opportunity cost table).
A risk neutral manager using this rule will select the option with the lowest regret/opportunity cost based on the assumption that the maximum regret will occur for all the available decision options.
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• Where probabilities are available but the decision maker is not interested in average, long-run values (expected values) but on actual one-off outcomes.
• Where it is not possible to assign meaningful probabilities to alternative courses of action.
The criterion used by the decision maker will be dependent upon his risk attitude:
• Risk seeker management will use maximax rule
• Risk averter management will use maximin rule
• Risk neutral management will use minimax regret rule
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(1) Maximax Rule
It is a strategy which maximizes the maximum gain.
A risk seeker manager using the rule will select the option with the largest payoff based on the assumption that the best possible outcome will occur for all the available options.
(2) Maximin Rule
It is a strategy which maximizes the minimum gain (or minimizes the maximum loss)
A risk averse manager using this rule will select the option with the largest payoff based on the assumption that the worst possible outcome will occur for all the available options.
(3) Minimax Regret Rule
It is a strategy which seeks to minimize the maximum possible regret ie opportunity cost that will be incurred as a result of having made the wrong decision (e.g. contribution/profit/cost savings forgone). The opportunity cost associated with each decision option will be summarized in a regret matrix (opportunity cost table).
A risk neutral manager using this rule will select the option with the lowest regret/opportunity cost based on the assumption that the maximum regret will occur for all the available decision options.
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