Because Norm asked1 A Few Business Basics IT-390 Since Norm asked

Because Norm asked2 Strategic Management The aim to achieve competitive advantage –Interrelated nature of business function –Cross-functional in nature –Requires Strategic formulation, implementation & evaluation –Requires both: Intuition & analysis –Adapting to change is a key for business survival

Because Norm asked3 Strategic Management According to Websters New World Dictionary, strategy is: –The science of planning and directing large scale military operations, of maneuvering forces into the most advantageous position prior to actual engagement of the enemy –I.E. Achieve competitive advantage.

Because Norm asked4 Strategic Management 3 Stages of the Strategic Management Process –1.Strategy Formulation –2.Strategy Implementation –3.Strategy Evaluation

Because Norm asked5 Strategic Management Demings Cycle –Plan –Do –Check –Act

Because Norm asked6 Strategic Management 10 key External Forces –Competitive- Technological –Economic- Government –Social- Political –Cultural- Environment –Demographic- Legal

Because Norm asked7 Competitive Analysis Porters Five-Forces Model of Competition

Because Norm asked8 Competitive Analysis –Rivalry among competitive firms –Potential entry of new competitors –Potential development of substitute products –Bargaining powers of consumers –Bargaining power of suppliers

Because Norm asked9 Competitive Analysis Rivalry among competitive firms –Number of competitors –Rate of industry growth –Amount of fixed costs –Capacity –Height of exit barriers –Diversity of rivals

Because Norm asked10 Competitive Analysis Potential entry of new competitors –Economies of scale –Product differentiation –Capital requirements –Switching costs –Access to distribution channels –Government policy –Barriers to entry

Because Norm asked11 Competitive Analysis Potential development of substitute products –Tea for coffee –Plastic vs. glass –Fountain pens for ballpoint pens –Computers replaced typewriters

Because Norm asked12 Competitive Analysis Bargaining power of consumers When consumers affect an industry through their ability to force down prices,, bargain for more services or higher quality, play competitors against each other Powerful if consumers purchases large portion of output - alternative suppliers are plentiful Rival firms may offer extended warranties or special services

Because Norm asked13 Competitive Analysis Bargaining power of suppliers –Powerful if: Supplier industry is dominated by a few companies but sells to many Product or service is unique or it has built up switching costs Substitutes are not readily available Purchasing industry buys only a small portion of the supplier group goods and are thus unimportant to the supplier.

Because Norm asked14 Strategic Management 14 Key Internal Forces –Management- Marketing –Manufacturing- R & D –Prod. Ops.- Purchasing –Distribution- Fin/Acctg –Packaging- Promotion –Emp/Mgr relations- HR Management –Vendor Relations- I.S.

Because Norm asked15 Types of Strategies Business strategy is sometimes termed as Competitive Strategy –Integration Strategies –Intensive Strategies –Diversification Strategies –Defensive Strategies

Because Norm asked16 Types of Strategies Business Strategy should include: –The product-market in which the business is to compete –The level of investment –The sustainable competitive advantage –The distinctive competencies or assets relied on –The objectives to guide strategic decision making

Because Norm asked17 Types of Strategies Integration Strategies –Forward Integration Strategies dealing w/distributors or retailers –Backward Integration Strategies dealing with suppliers –Horizontal Integration Strategies dealing with competitors

Because Norm asked18 Types of Strategies Intensive Strategies –Market Penetration Existing markets, existing products/services –Market Development Existing product/services, new geographical area –Product Development Improving or modifying existing products/services

Because Norm asked19 Types of Strategies Diversification Strategies –Concentric Diversification Adding new but related products/services –Horizontal Diversification Adding new unrelated products/services, existing customers –Conglomerate Diversification Adding new unrelated products/services

Because Norm asked20 Types of Strategies Defensive Strategies –Joint Venture Form temporary partnership or consortium –Retrenchment Regroups with cost and asset reductions –Divestiture Selling a division or part of the organization –Liquidation Selling all the companys assets

Because Norm asked21 Types of Strategies Other strategies: –Combination –Mergers –Acquisitions –Takeover or hostile takeover –Leveraged Buyouts (LBOs) –Regulation & other Political Activity –Executive Recruitment

Because Norm asked22 Types of Strategies Porters Generic Strategies Defined –Cost Leadership A strategy aimed at producing standardized products at low per-unit cost for cunsumers who are price- sensitive. –Differentiation A strategy aimed at producing products and services considered unique industrywide and directed at consumers who are relatively price insensitive.

Because Norm asked23 Types of Strategies Porters Generic Strategies (cont.) –Focus (Niche Market) A strategy aimed at producing products and services that fulfill the needs of small groups and customers.

Because Norm asked24 Types of Strategies Other Porter Strategies: –Value Chain Total revenues minus total costs yields value. To be profitable, total revenues must exceed total costs. A firm must try to understand the competitors value chain –Competitive Advantage of Nations Various nations differ in what they have to offer businesses. I.e. cheap labor, natural resources, etc.

Because Norm asked25 Types of Strategies Bottom Line: –Do things faster, better, cheaper than the competition