Strategic management-1225618249687247-9

PowerPoint slides by

R. Dennis Middlemist

Colorado State University

Chapter 6Chapter 6

Strategic Strategic ManagementManagement

2 ©2005 Prentice Hall

Learning ObjectivesLearning Objectives

Define strategy Explain the role of environmental analysis in

strategy formulation Explain the strategic planning process Utilize strategic planning tools, such as the

product life cycle model, portfolio matrix, and SWOT analysis.

After studying this chapter, you should be able to:


Learning ObjectivesLearning Objectives

Describe strategy implementation tools such as the Seven S Model.

Describe the differences between intended and emergent strategies.

After studying this chapter, you should be able to:


Competitive AdvantageCompetitive Advantage

Competitive advantage The ability of a firm to win consistently over

the long term in a competitive situation. Competitive advantage is created through

the achievement of five qualities Non-substitutability Appropriability

Superiority Inimitability Durability


Five Qualities that Lead to Five Qualities that Lead to Competitive AdvantageCompetitive Advantage

Superiority Are you significantly better

than your competitors? At what things are you

better?

Superiority


Inimitability


Inimitability Managers must create

barriers that make it hard for others to copy their superiority advantages

Culture Product design Marketing strategy And others

Superiority


Durability


Durability (long lasting) Legally protected

Patents Copyrights Brand names

Well-established Brand image Reputation for quality

Superiority

Inimitability



Non-substitutability Can the customer’s need

that you fulfill can be met by alternative means?

Encyclopedias vs. information availability on the Internet

Movie theater entertainment vs. concert band entertainment

Superiority

Inimitability

Durability

Non-substitutability



Appropriability Can you actually capture

the profits that can be made in the business?

Supernormal returns Profits that are above the

average for a comparable set of firms

Primarily a function of greater‑than‑average cost‑price margins

Superiority

Inimitability

Durability

Non-substitutability

Appropriability


Strategic Management Process: Strategic Management Process: Setting DirectionSetting Direction

Strategic management process is a planning process in which managers

1. Set the organization's general direction and objectives

2. Formulate a specific strategy3. Plan and carry out the strategy’s

implementation4. Monitor results and make necessary

adjustments


Strategic Strategic Management Management

ProcessProcess

Determine strategic intent

Define organizational mission

Analyze environment

Set objectives

Determine requirements

Assess resources

Develop action plans

Implement plans

Monitor outcomes

Strategic Planning Feedback

Adapted from Exhibit 6.1: Strategic Management Process


Strategic Management Process:Strategic Management Process:Setting DirectionSetting Direction

Strategic intent: what the organization ultimately wants to be and do

General identity, direction, and level of aspirations of the organization

A key objective is to inspire Should paint a general picture of aspiration

and engender a strong emotional response in just a few words

Strategic Intent



Mission statement articulates the fundamental purpose of the organization

Company philosophy Company identity, or self-concept Principal products or services Customers and markets Geographic focus Obligations to shareholders Commitment to employees

Mission


Mission Statement for the Mission Statement for the Internal Revenue ServiceInternal Revenue Service

The IRS mission is to “provide America’s taxpayers

top quality service by helping them

understand and meet their tax responsibilities

and by applying the tax law with

integrity and fairness to all.”

Adapted from Exhibit 6.2 Mission Statement for the Internal Revenue Service



Strategic objectives translate the strategic intent and mission of the firm into concrete and measurable goals

Facilitates a firm's ability to Allocate resources appropriately Reach a shared understanding of priorities Delegate responsibilities Hold people accountable for results

Strategic Objectives



Strategic objectives address many issues, such as Revenue growth Profitability Customer satisfaction Market share Financial returns (e.g.,

return on equity, return on assets)

Technological leadership

Cash flow Operating efficiency

(e.g., costs per unit, expense per employee)

Strategic Objectives


Strategic Management Process: Strategic Management Process: Formulating a Strategy Formulating a Strategy

Competitive strategy: determining how the company is going to compete and achieve its strategic objectives, mission, and ultimate strategic intent Generic strategies Techniques and tools



Generic strategies Cost leadership Differentiation Scope


Str

ate

gy

ScopeGeneral Focused

Dif

fere

nti

atio

n

C

ost

Lea

der

ship

Generic Strategies and ScopeGeneric Strategies and Scope

General player whose product or service features command premium prices and whose costs are at the industry average.

Example: Sony

Niche player with average costs but commanding premium prices that focuses on the high end and customers in a general or specific geography.

Example: Morgan Motors

General player whose product or service features command industry average prices but whose costs are significantly below the industry average.

Example: Wal-mart

Niche player with average prices and below-average costs that focuses on a segment of customers or a specific geography.

Example: Columbia Sports

Adapted from Exhibit 6.3: Generic Strategies and Scope



Internal and external analysis Tools and concepts

Environmental analysis Value proposition

Organizational analysis Value chain Five primary activities Four support activities


Re

liab

ility

High

Low

Low HighPrice

Value Proposition for Three Value Proposition for Three Car CompaniesCar Companies

Equalvalue line

Company A

Company B

Company C

Best ValueBest Value

Adapted from Exhibit 6.4: Value Proposition for Three Companies


The Value ChainThe Value Chain

Primary Activities

Su

pp

ort

Act

ivit

ies

Firm infrastructure (e.g., Finance, Planning)

Human resource management

Technology development

Procurement

Inboundlogistics

Operations Outboundlogistics

Marketingand sales

After-saleservice

Adapted from Exhibit 6.5: The Value Chain



Leveraging the value chain Determine where in your value chain you

have the potential to add the greatest value Segment business activities, see the

important linkages and make adjustments Resource-based approach

Recognize and exploit internal strengths of the company



Core competencies Are interrelated sets of activities that deliver

competitive advantages in the short-term and long-term

Provide access to a wide variety of markets Significantly contribute to perceived customer

benefits of the end products or services Are difficult for competitors to imitate


Birth Growth Maturity Decline

High

LowTime

Integrating Internal and Integrating Internal and External AnalysesExternal Analyses

Product Life Cycle

Adapted from Exhibit 6.6: Product Life Cycle



Product Life Cycle

Adapted from Exhibit 6.7: International Product Life Cycles

High

Low

Time

Sal

es


BCG Matrix

High

LowRelative Market Share

Mar

ket

Att

ract

iven

ess

High


Portfolio Analysis

Adapted from Exhibit 6.8: BCG Matrix


BCG Matrix

High

LowRelative Market Share

Mar

ket

Att

ract

iven

ess

High


Portfolio Analysis

Adapted from Exhibit 6.9: International Matrix

Our Ability To Compete



Internal environment Strengths Weaknesses Tools

Core competencies framework

Resource analysis framework

Value chain framework

SWOT Analysis

Internal Environment

SWSW



External environment Opportunities Threats Tools

Product life cycle analysis Portfolio analysis Five forces framework

SWOT Analysis

External Environment

OTOTSWSW


2. Structure Basic grouping of reporting relationships and

activities Linking of separate organizational entities

Strategic Management Process: Strategic Management Process: Strategy ImplementationStrategy Implementation

Seven S’s1. Strategy

Plan or course of action Allocation of firm’s resources to

reach goals

Strategy

Structure

Adapted from Exhibit 6.10: Seven S Model



Strategy

Sharedvalues

Structure

Systems

4. Systems Formal processes and procedures

Management control systems Performance measurement and reward systems Planning and budgeting systems

The ways people relate to them

Seven S’s3. Shared Values

Significant meanings or guiding concepts




Strategy

Sharedvalues

Structure

Systems

Skills

Style

6. Style Leadership style of management Operating style of the organization Reflection of the norms people act upon

Seven S’s5. Skills

Organizational competencies Other capabilities residing in the

organization




Strategy

Sharedvalues

Structure

Systems

Skills

Style

Staff

Seven S’s7. Staff

Recruitment Selection Development Socialization Advancement of people in the

organization


Education

Strategic management-1225618249687247-9