Introduction to Strategic Management Business Management Strategic Management

On Having a Strategy

On Having no Strategy

Strategic Management Issues What is it? what are the main components of strategic management process?

Strategic planning Is the process of identifying the business of the firm today and in the future and then identifying the course of action it should purse, given its SWOT. With whom the firm will compete and how?

The strategic mgmt includes Define the business and its mission Where are we now? where do we want to go? what are our SWOT? Then choose strategies or courses of action Buying competitors, going overseas, opening new branches etc It is not easy to define (direction) some organizations operates locally, some have different products and distribution channels etc etc.

Competitive Advantage 1. What is Strategy? Firm Competitive Advantage Shareholder Value Strategy Profit Strategy: goal & set of policies designed to achieve competitive advantage Ex : Ferrari specializes in high performance cars and its competitive adv depends on high speed performance Ex: Toyota specializes in cost efficient production and strorng dealer network Competitive Advantage: ability to transform inputs into goods and services at a maximum profit on a sustained basis, better than competitors

Warren Bennis and Bert Manus say: Defining the company’s business (direction) requires a great deal of thought! Warren Bennis and Bert Manus say: To choose a direction , a leader must first have developed a mental image of a possible and desirable future state for the organization-vision….the critical point is that a vision articulates a view of a realistic, credible, attractive future for the organization, a condition that is better in some important ways than what now exist !

Managers use vision and mission in order to define their Company’s direction! vision: a general statement of an organization’s intended direction that evokes emotional feelings in its members Mission Statement: a statement that broadly outlines the enterprise’s purpose and serves to communicate" who the organization is, what it does, and where it is headed” (see page 114 for more mission examples)

Strategic management process cont Perform external and internal audits Opportunities and threats (external) & strengths and weaknesses (internal)

Translate the mission into strategic goals California energy mission: ’’assess and act through pubic/private partnership to improve energy systems?” What will this company’s managers think in coming 5 years? How many partnership? what types of partnership? with whom and when? etc etc

Generate and select strategies to reach strategic goals Strategy: is a bridge connecting where it is today with where it wants to be tomorrow. Ex: Wal-Mart years ago decided moving form being a small southern based chain of retail discount stores to becoming the national leader (market share) To achieve this company chooses several strategies; Reduced distribution costs and minimize inventory and delivery times through satellite based distribution system

Lets watch Kaufman’s video

Implement the strategy Means action and result Means applying four functions of mgmt :planning, organizing, leading and controlling Entering into new markets Hiring or firing new people Closing down some branches Eliminating product lines or opening new product lines

Employees must feel ownership and buy into a strategy! So strategy must be brief! Wall Mart’s strategy boils down to the familiar =low prices everyday! Dell’s strategy has always been =be direct! (see page 115 for more strategy in brief example)

Evaluating Good Strategy “So then I says to Borg, ‘You know, as long as we’re under siege, one of us ought to moon these Saxon dogs.’”

Evaluate performance Strategic control =is the process of assessing progress toward its strategic objectives and taking corrective action as needed to ensure optimal implementation

Evaluating Good Strategy Marketing Strategy at Delta Airlines In the mid 1980s Delta’s market researchers found that customers (particularly business customers) were strongly influenced to choose a particular airline by the airline’s frequent flyer program. Consequently, to motivate customers to choose Delta, they teamed up with American Express (an exclusive arrangement) to offer a special program: customers could receive triple miles if they would fly on Delta and purchase the tickets using the American Express card. How would you evaluate Delta’s strategy? (Good or bad?)

3. Evaluating Good Strategy What is the cost of the strategic initiative? How long will it take for competitors to imitate the strategic initiative? What are the barriers to imitation?

Types of strategies 3 main types of strategies A.Corporate level strategy (ex: p/117 Disney) Plan that identifies the portfolio of business that comprise a corporation and how they relate to each other B.Competitive strategy Identifies how to build and strengthen the business’s long term competitive position in the marketplace C.Functional strategy The overall course of action and basic policies that each department is to follow in helping the business accomplish its strategic goals

a. Corporate level strategies Concentration or One Product Strategy One product or product line exist ex: McDonald's, KFC, Coca Cola, Mercedes, Gerber Market penetration: a growth strategy boost sales of present products by more aggressively selling and marketing into the organization’s current market Geographical expansion: aggressively expanding into new geographic markets Horizontal integration : acquiring ownership or control of competitors who are competing in the same or similar markets with the same or similar product Vertical Integration: acquiring ownership or control of competitors who are competing at the different markets.

Swot analysis It supplies illustrative generic opportunities, threats , strengths and weakness to guide the manager’s analysis It provides a standardized four quadrant format for compiling the company’s situational information ex:p.26

Environmental Scanning Managers traditionally scan 6 areas see figure 5-8 in p.127 Economic trends ex: recession, inflation, monetary policies Competitive trends ex: competitor’s strategy changes, customer trends, market trends, exit of competitors, new product from competitors Political trends Ex: Election results, legislation, regulation, deregulation, special interest results Technological Trends Ex: introduction of new products, distribution technologies, rate of product obsolesce, trends in availability of supplies and raw materials Social Tends Ex: demographic trends, mobility, education, evolving values Geographical Trends Opening/closing new markets, factors affecting curent plant/office facilities, location of decisions

How managers scan? BRING ME INFO! Some have employees search for publications, internet, reports , newsletters ex: New York times and wall street journal Use consultants-environmental scanners Built up Internet news services

Benchmarking Is a process through which a company learn how to become the best in one or more areas by analyzing and comparing the practices of other companies that excel in those areas.

Two strategic planning tool TOWS =a strategic planning tool that presents possible strategies for addressing the firms SWOT From your environmental scan, benchmarking and swot analysis you fill in the SWOT

PORTFOLIO ANALYSIS HOW DO YOU DECIDE WHICH BUSINESS YOU KEEP UP IN (OR DROP FROM)A PROTFOLIO? ASSUMES THE BUSINESS ATTRACTIVENESS DEPEND ON TWO FACTORS GROWTH RATE OF A BUSINESS AND BUSINESS MARKET SHARE

BCG MATRIX A strategic planning tool that helps a manager asses a business unit”s attractiveness based on growth rate and market share

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