Strategic Management Spring 2007 Strategic Management

Strategic Management The larger vision that guides the activities of managers and other employees in an organization The set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals The process of establishing and sustaining competitive advantage Spring 2007 Strategic Management

Competitive Advantage What is it? An edge over your rivals Traditional sources Product and process technology Protected and regulated markets Access to financial resources Economies of scale New source People !!! Spring 2007 Strategic Management

Levels of Strategy Grand strategy Corporate Business-level Where are we going? Corporate What business are we in? Business-level How do we compete? Spring 2007 Strategic Management

The Strategic Management Process Analyze environment organization Identify OT Identify SW Identify mission and strategies Formulate strategies Feedback Implement strategies Spring 2007 Strategic Management

SWOT Analysis Strength Opportunity Where are we going? Weakness Threat Spring 2007 Strategic Management

Grand Strategies Growth Stability Retrenchment Spring 2007 Strategic Management

WalMart…Growth (Number of Stores) 6,141 24 Spring 2007 Strategic Management

Paths to Growth: WalMart Direction of growth New stores in existing markets Enter new markets New product lines Means of growth Greenfield Acquisition Spring 2007 Strategic Management

WalMart…International Expansion and Acquisitions Mexico 1991 Puerto Rico 1992 2003 (A) Supermercados Amigo Canada 1994 (A) Woolco Argentina 1995 Brazil China 1996 Germany 1997-8 (A) Wertkauf, Interspar * Korea 1998 (A) Makro, Kim’s Club * U.K. 1999 (A) Asda Japan 2002 (A) Seiyu (37% ownership) ** *Bailed out ** Not profitable Spring 2007 Strategic Management

General Electric – Overall Stability Earnings Before Taxes ($M) Spring 2007 Strategic Management

Kmart -- Decline Spring 2007 Strategic Management

Global Strategy: Four Choices Note that text combines global and home replication strategies Global Strategy: Four Choices Global Strategy Transnational Strategy High Cost and efficiency pressures Low Home Replication Strategy Multi domestic Strategy Low High Pressures for local responsiveness Spring 2007 Strategic Management

Corporate Level Strategy Strategic business units Diversification Single business Diversified Vertical Integration Conglomerate BCG Matrix Spring 2007 Strategic Management

Dell Products Single Product PowerEdge servers PowerVault and Dell | EMC storage products Services  PowerConnect switches OptiPlex desktops Latitude notebooks Dell Precision workstations Inspiron notebooks Dimension desktops Dell monitors Dell printers Axim handhelds Software and Peripherals Single Product Spring 2007 Strategic Management

ThyssenKrupp Diversified Spring 2007 Strategic Management

Vertical Integration Alcoa at a Glance Alcoa is the world’s leading producer of primary aluminum, fabricated aluminum, and alumina and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation, and industrial markets, bringing design, engineering, production, and other capabilities of Alcoa’s businesses as a single solution to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap® aluminum foil, Alcoa® wheels, and Baco® household wraps. Among its other businesses are vinyl siding, closures, precision castings, and electrical distribution systems for cars and trucks. Vertical Integration Spring 2007 Strategic Management

Intimates and Underwear Sara Lee Conglomerate Headquarters Food and Beverage Intimates and Underwear Household Products Spring 2007 Strategic Management

Another Conglomerate Spring 2007 Strategic Management

BCG Matrix Stars Problem Children Market Growth Cash Cows Market Share Dogs Problem Children Market Growth Low High Market Share Spring 2007 Strategic Management

What Business Are We In? What are our core competencies? Who are our customers? Economies of scale Economies of scope Spring 2007 Strategic Management

Business-Level Strategy Porter’s Five Forces Generic strategies Value chain Spring 2007 Strategic Management

Porter’s Five Forces Bargaining power of suppliers Bargaining power of buyers Threat of substitutes Potential new entrants to the market Rivalry among current competitors Spring 2007 Strategic Management

Porter’s Five Generic Strategies Low-cost leadership Broad differentiation Best-cost provider Focused or market niche / cost Focused or market niche / differentiation Low-cost leadership Appealing to a broad spectrum of customers, based on being the overall low-cost provider Broad differentiation Differentiated product, appealing to a broad spectrum of customers Best-cost provider More value for the money Focused or market niche / cost Narrow customer segment, low cost Focused or market niche / differentiation Narrow customer segment, differentiated product Spring 2007 Strategic Management

Value Chain Analysis How are we creating value for customers? Where can costs be reduced? Spring 2007 Strategic Management

The Value Chain Raw Materials Operations Distribution Sales and Marketing Customer Service Product R &D, Technology, Systems Development Human Resource Management General Administration Support Activities Spring 2007 Strategic Management

Strategy Implementation Leadership Structure and design Information and control systems Human resources Spring 2007 Strategic Management