1. Entrepreneurship and Effective Small Business Management 11/e by Scarborough and Cornwall
4-1

2. Strategic Management and the Entrepreneur
Chapter 4
Strategic Management and the Entrepreneur
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3. Strategic Management Developing a strategy for success!
Don’t just respond to the chaos in the environment, create the disruptions that revolutionize the industry, and, in the process, create a competitive edge
Apple Computer and the iPod

4. Strategic Management
The world economy is shifting from financial to intellectual capital
Knowledge is no longer just a factor of production, it is the critical factor of production

5. Strategic Management
Knowledge management: the practice of gathering, organizing, and disseminating the collective wisdom and experience of a company’s employees for the purpose of strengthening its competitive position

6. Strategic Management Intellectual capital: comprised of Human capital
Structural capital
Customer capital

7. Strategic Management
Strategic management: a process that involves developing a game plan to guide the company as it strives to accomplish its vision, mission, goals, and objectives and to keep it from straying off its desired course

8. Building a Competitive Advantage
Competitive advantage: the aggregation of factors that sets a company apart from its competitors and gives it a unique position in the market
The key to business success is to build a unique competitive advantage that creates value for customers, is sustainable, and is difficult to duplicate

9. Building a Competitive Advantage
To define competitive advantage, entrepreneurs should consider:
The products they sell
The services they provide
The pricing they offer
The way they sell
The values to which they are committed

10. Building a Competitive Advantage
Core competencies: unique set of skills, knowledge, or abilities that a company develops in key areas such as superior quality, customer service, innovation, team-building, flexibility, responsiveness, and others that allow it to vault past competitors

11. Building a Competitive Advantage
Building a Sustainable Competitive Advantage

12. Building a Competitive Advantage
Use core competencies to define a compelling value proposition: the value that the combination of goods and services that a business delivers to customers to create a sustainable competitive edge
Product or service leadership
Customer intimacy
Operation excellence

13. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses
Scan environment for opportunities and threats
Identify key success factors
Analyze competition
Create goals and objectives
Formulate strategies
Translate plans into actions
Establish accurate controls

14. The Strategic Management Process
Step 1: Develop a Clear Vision and Translate It into a Meaningful Mission Statement
Vision
An expression of what an entrepreneur stands for and believes in and the values on which they build their business
Answers the question: “What kind of business do we want to be”

15. The Strategic Management Process
A clearly defined vision:
Provides direction
Determines decisions
Motivates people
Allows a company to persevere in the face of adversity

16. The Strategic Management Process
Mission
Answers the question "What business am I in?”
Makes clear to everyone “why we are here” and “where we are going”

17. The Strategic Management Process
Elements of a mission statement
The purpose of the company
The business we are in
The values of the company

18. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses

19. The Strategic Management Process
Step 2: Assess the Company’s Strengths and Weaknesses
Strengths: positive internal factors that contribute to accomplishing the mission, goals, and objectives
Weaknesses: negative internal factors that inhibit the company’s ability to accomplish its mission, goals, and objectives

20. The Strategic Management Process
Identifying Company’s Strengths and Weaknesses

21. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses
Scan environment for opportunities and threats

22. The Strategic Management Process
Step 3: Scan the Environment for Opportunities and Threats Facing the Business
Opportunities: positive external options the company can exploit to accomplish its mission, goals, and objectives
Threats: negative external forces that inhibit the company’s ability to accomplish its mission, goals, and objectives

23. The Strategic Management Process
Identifying Opportunities and Threats

24. The Strategic Management Process
Identifying and Managing Major Threats

25. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses
Scan environment for opportunities and threats
Identify key success factors

26. The Strategic Management Process
Step 4: Identify the Key Factors for Success in the Business
Key success factors: factors that influence a company’s ability to compete successfully in an industry
Determine a company’s ability to compete in the marketplace

27. The Strategic Management Process
Identifying Key Success Factors

28. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses
Scan environment for opportunities and threats
Identify key success factors
Analyze competition

29. The Strategic Management Process
Step 5: Analyze the Competition
Tracking competition helps companies:
Avoid surprises from existing competitors’ new strategies and tactics
Identify potential new competitors
Anticipate rivals’ next strategic moves
Improve reaction time to competitors’ actions
Improve their ability to differentiate their companies’ products and services from those of competitors
Refine their companies’ competitive edge

30. The Strategic Management Process
Small Business Success Index

31. The Strategic Management Process
Competitor Analysis
Direct competitors
Offer the same products and services
Customers often compare prices, features, and deals among these competitors when they shop
Significant competitors
Offer some of the same or similar products or services
Product or service lines overlap but not completely
Indirect competitors
Offer same or similar products in only a small number of areas

32. The Strategic Management Process
Competitive profile matrix: allows entrepreneurs to evaluate their companies against major competitors on the key success factors for their market segments

33. The Strategic Management Process
Sample Competitive Profile Matrix

34. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses
Scan environment for opportunities and threats
Identify key success factors
Analyze competition
Create goals and objectives

35. The Strategic Management Process
Step 6: Create Company Goals and Objectives
Goals: broad, long-range attributes to be accomplished; general and abstract
“BHAGS”
Objectives: are specific targets of performance
Specific
Measurable
Assignable
Realistic (yet challenging)
Timely
Written down

36. The Strategic Management Process
What Makes an Effective BHAG?

37. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses
Scan environment for opportunities and threats
Identify key success factors
Analyze competition
Create goals and objectives
Formulate strategies

38. The Strategic Management Process
Step 7: Formulate Strategic Options and Select the Appropriate Strategies
Strategy: a “road map” that guides a company through a turbulent environment as it seeks to fulfill its mission, goals, and objectives
Mission, goals, and objectives = ends
Strategy = means

39. The Strategic Management Process
Three strategic options:
Strategy?
Cost leadership
Differentiation
Focus

40. The Strategic Management Process
Cost leadership strategy: to be the low-cost producer in the industry or market segment
Advantages:
Reaching buyers who buy on the basis of price
Power to set the industry’s price floor
Works well when:
Buyers are sensitive to price changes
Competing firms sell the same commodity products
A company can benefit from economies of scale
Disadvantages:
Purchase decisions are driven by price not loyalty
Can underestimate costs

41. The Strategic Management Process
Differentiation strategy: company seeks to build customer loyalty by positioning its goods or services in a unique or different fashion
Idea is to be better than the competition at something customers value
Key to success:
Build basis for differentiation on a distinctive competence, something that a small company is uniquely good at doing in comparison to its competitors
Create perceived value for the customer

42. The Strategic Management Process
Focus strategy: company selects one or more customer segments in a market, identifies customers’ special needs, wants, or interests, and then targets them with a product or service designed specifically for them
Strategy builds on differences among market segments
Rather than try to serve the total market, the company focuses on serving a niche (or several niches) within that market

43. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses
Scan environment for opportunities and threats
Identify key success factors
Analyze competition
Create goals and objectives
Formulate strategies
Translate plans into actions

44. The Strategic Management Process
Step 8: Implement the strategy
Create projects by defining:
Purpose
Scope
Contribution
Resource requirements
Timing

45. The Strategic Management Process
Strategic management is a continuous process
Develop a vision and translate it into a mission statement
Assess strengths and weaknesses
Scan environment for opportunities and threats
Identify key success factors
Analyze competition
Create goals and objectives
Formulate strategies
Translate plans into actions
Establish accurate controls

46. The Strategic Management Process
Step 9: Establish Accurate Controls
Controlling the strategy
Entrepreneur must:
Identify and track key performance indicators
Take corrective action if necessary
Balanced scorecard: a set of measurements unique to a company that includes both financial and operational measures
Gives managers a quick yet comprehensive picture of a company’s overall performance

47. The Strategic Management Process
The Balanced Scorecard

48. The Strategic Management Process
Five Perspectives:
Customer: How do customers see us?
Internal Business: At what must we excel?
Innovation and Learning: Can we continue to improve and create value?
Financial: How do we look to shareholders?
Corporate Citizenship: What must we do to meet our social responsibility to society as a whole, the environment, the community, and other stakeholders?