Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–1 Introduction to Management Bob Fast Chapter 7 Week 4B October 4 I M Fall 2011

PowerPoint Presentation by Clive Cook and Dale Dilamarter Gary Dessler Frederick A. Starke Gary Dessler Frederick A. Starke Principles and Practices for Tomorrow’s Leaders Second Canadian Edition Principles and Practices for Tomorrow’s Leaders Second Canadian Edition Management Copyright © 2004 Pearson Education Canada, Inc. All rights reserved. Strategic Management Strategic Management 7 CHAPTER

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–3 Chapter Objectives After studying this chapter and the case exercises at the end, you should be able to: 1.Develop a workable strategic plan for an organization using SWOT analysis. 2.Identify a company’s current corporate strategies and list its strategic options. 3.Develop a vision and mission statement for a company. 4.Accurately identify a company’s “core competencies.” 5.Explain each of the strategic planning tools you think the CEO should use, and why.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–4 Strategy and Planning Strategy  A comprehensive and integrated plan that states how the organization will use its resources in the pursuit of its mission and objectives. Strategic Planning  A process that involves defining the mission of the business and laying out the broad strategies or courses of action the firm will use to achieve that mission.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–5 The Strategic Management Process 1.Define the business and its mission. 2.Perform external and internal audits 3.Translate the mission into strategic goals 4.Formulate a strategy to achieve the strategic goals 5.Implement the strategy 6.Evaluate performance

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–6 A Comprehensive Strategic-Management Model FIGURE 7–1 Source: Adapted from Fred David, Strategic Management (Upper Saddle River, NJ: Prentice-Hall, 2001), p. 77.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–7

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–8 FIGURE 7–2 Strategies in Brief Source: Arit Gadiesh and James Gilbert, “Frontline Action,” Harvard Business Review, May 2001, p. 74. COMPANYSTRATEGIC PRINCIPLE America OnlineConsumer connectivity first—anytime, anywhere Dell Be direct eBayFocus on trading communities General ElectricBe number one or number two in every industry in which we compete, or get out Southwest AirlinesMeet customers’ short-haul travel needs at fares competitive with the cost of automobile travel VanguardUnmatchable value for the investor-owner Wal-MartLow prices, every day COMPANYSTRATEGIC PRINCIPLE America OnlineConsumer connectivity first—anytime, anywhere Dell Be direct eBayFocus on trading communities General ElectricBe number one or number two in every industry in which we compete, or get out Southwest AirlinesMeet customers’ short-haul travel needs at fares competitive with the cost of automobile travel VanguardUnmatchable value for the investor-owner Wal-MartLow prices, every day

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–9 Types of Strategies Corporate-level strategy  Identifies the portfolio of businesses that compose the corporation and the ways in which these businesses fit together Competitive strategy  Identifies how to build and strengthen the business’s long-term competitive position in the marketplace Functional strategies  Identify the basic courses of action that each department will pursue to contribute to the attainment of its goals

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–10 FIGURE 7–3 Relationships Among Strategies in Multiple-Business Firms

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–11 Checklist 7.1 How to Test the Quality of Your Strategy  Does your strategy fit with what’s going on in the environment?  Does your strategy exploit your key resources?  Will competitors have difficulty keeping up with you?  Are the elements of your strategy internally consistent?  Do you have enough resources to pursue this strategy?  Can your strategy be implemented?

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–12 Generic Corporate Strategies Concentration Market penetration Geographic expansion Product development Horizontal integration Vertical integration Diversification Status quo Retrenchment Strategic alliances and Joint ventures Virtual corporation

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–13 FIGURE 7–5 How the Internet Influences Industry Structure Source: Adapted from Michael Porter, “Strategy and the Internet,” Harvard Business Review, March 2001, p. 67.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–14 Generic Competitive Strategies Low-cost leader Differentiator Focuser

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–15 Formulating Specific Competitive Strategy Requires understanding the competitive forces that determine how intense the competitive rivalries are and how best to compete

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–16 FIGURE 7–4 Forces Driving Industry Competition Source: Source: Reprinted with the permission of The Free Press, a division of Simon & Schuster from Competitive Strategy: Techniques for Analyzing Industries and Competitors by Michael E. Porter. Copyright © 1980 by The Free Press.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–17 Strategic Planning Methods Strengths, Weaknesses, Opportunities, Threats (SWOT) Environmental scanning Benchmarking TOWS matrix Portfolio analysis

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–18 FIGURE 7–6 Examples of a Company’s Strengths, Weaknesses, Opportunities, and Threats

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–19 FIGURE 7–7 Worksheet for Environmental Scanning

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–20 Checklist 7.2 How to Benchmark  Focus on a specific problem and define it carefully  Use employees who will actually implement changes to identify the best-practices companies and to conduct on-site studies.  Be willing to share information with others.  Avoid sensitive issues such as pricing, and don’t look for new product information.  Keep information you receive confidential.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–21 FIGURE 7–8 Cineplex Odeon TOWS Matrix Source: Fred David, Strategic Management (Upper Saddle River, NJ: Prentice-Hall, 2001), p. 207.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–22 FIGURE 7–9 BCG Matrix

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–23 Scenario Planning Used in an attempt to deal with unpredictable future events Tries to answer two kinds of questions  How might some hypothetical situation come about  What alternatives exist for preventing (or facilitating) the process

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–24 Scenario Planning Principles  Scenarios have value only to the extent that they inform decision makers and influence decision making.  Scenarios add value to decision making only when managers and others use them to systematically shape questions about the present and the future, and to guide how to go about answering them.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–25 Scenario Planning Principles  In developing scenarios, the emphasis must be on identifying, challenging, and refining the substance of managers’ mindsets and knowledge.  Alternative projections about a given future must challenge managers’ current mental models by creating tension among ideas, hypotheses, perspectives, and assumptions.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–26 Scenario Planning Principles  The dialogue and discussion triggered by the consideration of alternative futures should directly affect managers’ knowledge.  Scenarios should include enough indicators so that managers can track how the future is actually evolving. In this way, the learning and adaptations stimulated by the scenarios are continual.

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–27 Implementing Strategy Achieving strategic fit Leveraging core competencies Effectively leading the change process

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–28 Case Study More Upheaval in the Airline Industry  Review Case  Discuss Questions on page 225

Copyright © 2004 Pearson Education Canada, Inc. All rights reserved.7–29 Next Class – October 11 Quiz #2: Chap 5, 6, 7 & 8 Review (in class): Reading Assignment #1 Read: Chap 9 – Designing Organizational Structures Reading Assessment #2 Assigned Guest Presenter: Don Streuber, President of Bison Transport