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STRATEGIC
MANAGEMENT
LECTURE
STRATEGIC
MANAGEMENT
LECTURE
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““Without a strategy theWithout a strategy the
organization is like aorganization is like a
ship without a rudder,ship without a rudder,
going around ingoing around in
circles.”circles.”
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Thinking Strategically:Thinking Strategically:The 3 Big StrategicThe 3 Big Strategic
QuestionsQuestions
1. Where are we now?
2. Where do we want to go?
Business(es) to be in and marketpositions to stake out
Buyer needs and groups to serve
Outcomes to achieve
3. How will we get there?
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Benefits of “Strategic Thinking”Benefits of “Strategic Thinking”
and a “Strategic Approach” toand a “Strategic Approach” to
ManagingManaging
Guides entire firm regarding “what it is we are trying to do andto achieve”
Makes managers more alert to“winds of change, new opportunities,
and threatening developmentsUnifies numerous strategy-relateddecisions and organizational efforts
Creates a proactive atmosphere
Promotes development of an evolving business model
focused on bottom-line success
Provides basis for competing and achieving competitiveadvantage
HELPS A COMPANY PREPARE FOR
THE FUTURE!
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Who Performs the FiveWho Performs the Five
Strategic ManagementStrategic Management
Tasks?Tasks?SeniorCorporateExecutives
Managers of SubsidiaryBusiness Units
Functional AreaManagers
OperatingManagers
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SETTING CORPORATESETTING CORPORATE
DIRECTIONDIRECTION[ TASKS 1 & 2]
“IF YOU DON’T KNOW “IF YOU DON’T KNOW
WHERE YOU ARE GOING,WHERE YOU ARE GOING,
ANY ROAD WILL TAKE YOU ANY ROAD WILL TAKE YOUTHERE”THERE”
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TASK 1 – VISION & MISSION
TASK 2 – GOALS & OBJECTIVES
SETTING CORPORATESETTING CORPORATE
DIRECTIONDIRECTION
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Developing a Strategic VisionDeveloping a Strategic Vision
Involves thinking strategically
about Future of company
Where are we going?
Statement about a company’slong-term direction
Task 1 of the Strategic Management ProcessTask 1 of the Strategic Management Process
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Example: VisionStatement
To be the customer’s first
choice for communications and
information services in every
market we serve,
domestic and international.
Verizon Communications
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We will clothe the world by
marketing the most appealing
and widely worn casualclothing in the world.
Levi Strauss & Company
Example: VisionExample: Vision
StatementStatement
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“A computer on every desk, in every home”
Microsoft Corporation
(Old Vision)
Example: VisionExample: Vision
StatementStatement
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GE is committed to achieving worldwide leadership in
each of its businesses. To achieve that leadership, GE's
ongoing business strategy centers on four key growth
initiatives:
- Technology
- Services
- Customer Centricity
- Globalization
General Electric
(Jeff Immelt)
xamp e: s onxamp e: s onStatementStatement
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MISSIONMISSION
DEFINES A COMPANY’SBUSINESS:
• PRODUCT / MARKET
• TERRITORY /
GEOGRAPHY
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More Mission Statements …
Otis Elevator
Our mission is to provide any customer a meansof moving people and things up, down, and
sideways over short distances with higher reliability than any similar enterprise in the world.
Our business is renting cars. Our mission is total
customer satisfaction.
Avis Rent-a-Car
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The purpose of the IRS is to collect
the proper amount of tax revenues at
the least cost to the public, and in a
manner that warrants the highest
degree of public confidence in our
integrity, efficiency and fairness.
INTERNAL REVENUE SERVICE
OLD MISSION
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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.
IRS - NEW MISSION (Since 1998)
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Setting Goals & ObjectivesSetting Goals & Objectives
Converts vision andmission into specific
performance targetsCreates yardsticks totrack performance
“Management byObjective” (MBO) -focused on results
Second Task of Strategic Management
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GOALSGOALS
= BROAD TARGETS
OBJECTIVESOBJECTIVES
(a) QUANTIFIED
(b) TIME-BASED
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2 CATEGORIES
1) FINANCIAL
2) STRATEGIC
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STRATEGY
FORMULATION
[TASK 3]
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Levels of Strategy Making inLevels of Strategy Making in
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Levels of Strategy-Making inLevels of Strategy-Making in
a Single-Business Companya Single-Business Company
Business
Strategy
Two-Way Influence
Two-Way Influence
Functional Strategies
Operating Strategies
Executive-Level Managers
Operating
Managers
Functional Managers
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Factors Shaping the
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Factors Shaping theChoice of Company Strategy
Company’s Strategic SituationCraft
the
strategy
External Factors
Internal Factors
Social,political,
regulatory
and
community
factors
Competitive
conditions
and industry
attractiveness
Companyopportunities
and threats to
company’s
well-being
Resource
strengths,
capabilities,
and
weaknesses
Influences of
key
executives
Shared values
and company
culture
Identify
and
evaluate
alternatives
Determinerelevance
of internal
and
external
factors
SWOT A l iSWOT Analysis
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SWOT AnalysisSWOT Analysis
- What to Look For- What to Look ForPotential Resource
Strengths
Potential Resource
Weaknesses
Potential Company
Opportunities
Potential External
Threats
• Powerful strategy
• Strong financialcondition
• Strong brand nameimage/reputation
• Widely recognizedmarket leader
• Proprietarytechnology
• Cost advantages
• Strong advertising
• Product innovation
skills
• Good customer service
• Better productquality
• Alliances or JVs
• No clear strategicdirection
• Obsolete facilities
• Weak balancesheet; excess debt
• Higher overallcosts than rivals
• Missing some keyskills/competencies
• Subpar profits
• Internal operatingproblems . . .
• Falling behind inR&D
• Too narrowproduct line
• Weak marketingskills
• Serving additionalcustomer groups
• Expanding to newgeographic areas
• Expanding productline
• Transferring skillsto new products
• Vertical integration
• Take market sharefrom rivals
• Acquisition of
rivals• Alliances or JVs to
expand coverage
• Openings to exploitnew technologies
• Openings to extendbrand name/image
• Entry of potent newcompetitors
• Loss of sales tosubstitutes
• Slowing marketgrowth
• Adverse shifts inexchange rates &trade policies
• Costly newregulations
• Vulnerability tobusiness cycle
• Growing leverageof customers or suppliers
• Reduced buyer needs for product
• Demographicchanges
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The Basic Strategy Framework:
Link between the Firm and its
Environment
The Basic Strategy Framework:
Link between the Firm and its
Environment
THE FIRM
Goals &Values
Resources &
Capabilities
Structure &
Systems
THEINDUSTRY
ENVIRONMENT
Competitors
CustomersSuppliers
STRATEGYSTRATEGY
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Market-Focus (External)
vs.
Resourced-Based (Internal)
Market-Focus (External)
vs.
Resourced-Based (Internal)
Market-Focus – what industry dowe want to be in, the position we
want to take, and then how can weassemble the resources tocompete?
Resource-Based – whatcapabilities do we want to buildand what market opportunities
would exploit them best?
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MARKET-FOCUS VIEW
OF STRATEGY (EXTERNAL ANALYSIS)
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5 Forces Model5 Forces Model
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5 Forces Model5 Forces Model
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Industry Driving ForcesIndustry Driving Forces
Internet and e-commerceopportunities
Increasing globalization of industry
Changes in long-term industrygrowth rate
Changes in who buys the product
and how they use itProduct innovation
Technological change/process
innovation
Wh t A th K F tWh t A th K F t
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What Are the Key FactorsWhat Are the Key Factorsfor Competitive Success?for Competitive Success?
Competitive factors most affectingevery industry member’s ability toprosper Specific strategy elements Product attributes Resources Competencies Competitive capabilitiesKSFs spell the difference between Profit and loss
Competitive success or failure
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Example: KSFs for BeerExample: KSFs for Beer
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Example: KSFs for BeerExample: KSFs for Beer
IndustryIndustry
Full utilization of brewing capacity-- to keep manufacturing costs low
Strong network of wholesaledistributors -- to gain access toretail outlets
Clever advertising -- to inducebeer drinkers to buy a particularbrand
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Example: KSFs for ApparelExample: KSFs for ApparelManufacturing IndustryManufacturing Industry
Appealing designs andcolor combinations -- tocreate buyer appeal
Low-costmanufacturing
efficiency -- to keepselling pricescompetitive
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COMPETITOR COMPETITOR
ANALYSISANALYSIS
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Strategic Group MappingStrategic Group Mapping
Firms in same strategic group have two ormore competitive characteristics incommon
Have comparable product line breadth Sell in same price/quality range Emphasize same distribution channels Use same product attributes to appeal to similar
types of buyers Use identical technological approaches Offer buyers similar services Cover same geographic areas
Example: Strategic Groupxamp e: trateg c roup
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Example: Strategic Groupxamp e: trateg c roupMapMapof Selected Retail Chainsof Selected Retail Chains
Concept ofConcept of
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Concept of Concept of
Competitive AdvantageCompetitive Advantage
Competitive advantage exists whena firm’s strategy gives it an edge in Attracting customers and Defending against competitive forces
Convince customers firm’s product /
service offers superior value A good product at a low price A superior product worth paying more
for
A best-value product
Key to Gaining a Competitive Advantage
5 Generic Competiti e5 Generic Competitive
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5 Generic Competitive5 Generic Competitive
StrategiesStrategies
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RESOURCE-BASED VIEW
OF STRATEGY (INTERNAL ANALYSIS)
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Examples of Core CompetenciesExamples of Core Competencies
Expertise in integrating multipletechnologies to create families of newproducts
Know-how in creating operatingsystems for cost efficient supply chainmanagement
Speeding new/next-generationproducts to market
Better after-sale service capability
Skills in manufacturing a high qualityproduct
System to fill customer orders
Example: Honda’sExample: Honda’s
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Example: Honda sExample: Honda sCore CompetenceCore Competence
Expertise in gasoline engine
technology and small engine
design
Example: Intel’s CoreExample: Intel’s Core
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Example: Intel’s CoreExample: Intel’s Core
CompetenceCompetence
Design of complex chips for
personal computers
Example: Procter &Example: Procter &
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Example: Procter &Example: Procter &Gamble’sGamble’s
Core CompetenciesCore CompetenciesSuperb marketing-distribution skills and
R&D capabilities in five core
technologies - fats, oils, skin chemistry,
surfactants, emulsifiers
Example: Sony’s CoreExample: Sony’s Core
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Example: Sony s CoreExample: Sony s CoreCompetenceCompetence
Expertise in electronic technology and
ability to translate the expertise into
innovative products—miniaturized
radios and video cameras, TVs andVCRs with unique features, attractively
designed PCs
Distinctive Competence -- ADistinctive Competence -- A
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ppCompetitivelyCompetitively Superior Superior ResourceResource
# 1
A distinctive competence is a competitivelysignificant activity that a company performsbetter than its competitors
A distinctive competence®Represents a competitively
valuable capability rivals do not have
®Presents attractive potential for being a cornerstone of strategy
®Can provide a competitive edge in the
marketplace—because it represents a
com etitivel su erior resource stren th
Examples: DistinctiveExamples: Distinctive
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Examples: DistinctiveExamples: Distinctive
CompetenciesCompetencies
Sharp Corporation Expertise in flat-panel display technology
Toyota, Honda, Nissan Low-cost, high-quality manufacturing
capability and short design-to-marketcycles
Intel
Ability to design and manufactureever more powerful microprocessors forPCs
Starbucks
Store ambience and innovative coffee
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Example: Key Value ChainExample: Key Value Chain
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a p e ey a ue C ap y
ActivitiesActivities
Timber farming
Logging
Pulp mills
Papermaking
Pulp & Paper Industry
Example: Key Value ChainExample: Key Value Chain
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Parts and components
manufacture
Assembly
Wholesale distributionRetail sales
Home Appliance Industry
Example: Key Value ChainExample: Key Value Chain
ActivitiesActivities
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Example: Key Value ChainExample: Key Value Chain
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Programming
Disk loading
Marketing
Distribution
Computer Software Industry
Example: Key Value ChainExample: Key Value Chain
ActivitiesActivities
Benchmarking Costs ofBenchmarking Costs of
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Benchmarking Costs of Benchmarking Costs of Key Value Chain ActivitiesKey Value Chain Activities
Focuses on cross-company comparisons of how certain activitiesare performed and the costs associatedwith these activities Purchase of materials Payment of suppliers Management of inventories Getting new products to market Performance of quality control Filling and shipping of customer orders Training of employees Processing of payrolls
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Implementing a Newly
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Implementing a NewlyChosen Strategy Requires
Adept LeadershipImplementing a new strategy takes adept leadership to
Convincingly communicatereasons for the new strategy
Overcome pockets of doubt
Build consensus and enthusiasm
Secure commitment of concerned parties
Get all implementation pieces in place andcoordinated
Who Are theWho Are the
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Who Are theWho Are the
Strategy Implementers?Strategy Implementers?
Implementing and executing strategyinvolves a company’s wholemanagement team and all of itsemployees Just as every part of a watch plays a role in
making the watch function properly, it takesall pieces of an organization workingcohesively for a strategyto be well-executed
Top-level managers must lead theprocess and orchestrate major initiatives But they must rely on the cooperation of
middle
and lower-level managers to see that things
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Numerous RolesNumerous Roles
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Visionary
Chief
Entrepreneur
& Strategist Capabilities
Builder
Resource Acquirer
& Allocator
Culture
Builder
Chief
Administrator
& Strategy
Implementer
Process
Integrator Coach
Crisis
Solver
Taskmaster
Spokesperson
Negotiator
Motivator
Arbitrator
Consensus
Builder
Policymaker Policy
Enforcer
Mentor
Head
Cheerleader
of Strategic Leadersof Strategic Leaders
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