Download presentation
Presentation is loading. Please wait.
1
Managing Strategically
Chapter 9 Managing Strategically Copyright © 2016 Pearson Canada Inc.
2
Copyright © 2016 Pearson Canada Inc.
Learning Outcomes: Explain the role of strategic management and why it is important. Explain the role of managers in each of the six strategic management step. Describe three types of organizational strategies. Describe competitive advantage and the competitive strategies organizations use to get it. Discuss current strategic management issues. Copyright © 2016 Pearson Canada Inc.
3
The Importance of Strategic Management
What is Strategic Management? What managers do to develop the organization’s strategies. Learning Outcome 1: Explain the role of strategic management and why it is important. The role that the environment plays has influenced managers in developing a systematic means of analyzing the environment, assessing their organization’s strengths and weaknesses, identifying opportunities that would give the organization a competitive advantage, and incorporating these findings into their planning. The value of thinking strategically has an important impact on organization performance. Strategic management is that set of managerial decisions and actions that determines the long-run performance of an organization. 2. It entails all of the basic management functions—planning, organizing, leading, and controlling. Copyright © 2016 Pearson Canada Inc.
4
The Importance of Strategic Management
Strategies: Plans for how an organization will do what it’s in business to do, how it will compete successfully, and how it will attract and satisfy its customers in order to achieve its goals. Learning Outcome 1: Explain the role of strategic management and why it is important. The role that the environment plays has influenced managers in developing a systematic means of analyzing the environment, assessing their organization’s strengths and weaknesses, identifying opportunities that would give the organization a competitive advantage, and incorporating these findings into their planning. The value of thinking strategically has an important impact on organization performance. 1. Strategic management is that set of managerial decisions and actions that determines the long-run performance of an organization. 2. It entails all of the basic management functions—planning, organizing, leading, and controlling. Copyright © 2016 Pearson Canada Inc.
5
The Importance of Strategic Management
Business model: A strategic design for how a company intends to profit from its strategies, work processes, and work activities. A company’s business model focuses on two things: Learning Outcome 1: Explain the role of strategic management and why it is important. One term that is often used in conjunction with strategic management and strategies is business model, which is a strategic design for how a company intends to profit from its strategies, work processes, and work activities. A company’s business model focuses on two things: (1) whether customers will value what the company is providing and (2) whether the company can make any money doing that.6 For instance, Jeff Bezos pioneered a new business model for selling books to consumers whether customers will value what the company is providing (2) whether the company can make any money doing that. Copyright © 2016 Pearson Canada Inc.
6
The Importance of Strategic Management
Why is Strategic Management Important? It results in higher organizational performance. It requires that managers examine and adapt to business environment changes, allowing them to better cope with uncertain environments. Learning Outcome 1: Explain the role of strategic management and why it is important. 1. One reason strategic management is important is because it can make a difference in how well an organization performs. 2. Another reason has to do with the fact that organizations of all types and sizes face continually changing situations. 3. Strategic management is also important because it’s involved in many of the decisions that managers make. Copyright © 2016 Pearson Canada Inc.
7
The Importance of Strategic Management
It’s involved in many of the decisions that managers make. Learning Outcome 1: Explain the role of strategic management and why it is important. 1. One reason strategic management is important is because it can make a difference in how well an organization performs. 2. Another reason has to do with the fact that organizations of all types and sizes face continually changing situations. 3. Strategic management is also important because it’s involved in many of the decisions that managers make. Copyright © 2016 Pearson Canada Inc.
8
The Importance of Strategic Management
Not-for-Profits & Strategic Management Today, strategic management has moved beyond for-profit business organizations to include government agencies, hospitals, and other not-for-profit organizations. Learning Outcome 1: Explain the role of strategic management and why it is important. For instance, when Canada Post found itself in intense competitive battles with overnight package-delivery companies, courier services, and , its CEO used strategic management to help pinpoint important issues and design appropriate strategic responses. Although strategic management in not-for-profits has not been as well researched as that in for-profit organizations, it’s important for these organizations as well. Copyright © 2016 Pearson Canada Inc.
9
The Strategic Management Process
Strategic management process : A six-step process that encompasses strategic planning, implementation, and evaluation. Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Although the first four steps describe the planning that must take place, implementation and evaluation are just as important! Even the best strategies can fail if management does not implement or evaluate them properly. Let’s examine the six steps in detail. Copyright © 2016 Pearson Canada Inc.
10
Exhibit 9-1 The Strategic Management Process
Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. The strategic management process is a six-step process that encompasses strategic planning, implementation, and evaluation (see Exhibit 9-1). Copyright © 2016 Pearson Canada Inc.
11
The Strategic Management Process
Step 1: Identify the Organization’s Current Mission, Objectives, and Strategies Mission: the firm’s reason for being The scope of its products and services Goals: the foundation for further planning Measurable performance targets Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Step 1: Identifying the Organization’s Current Mission, Objectives, and Strategies. 1. Every organization needs a mission, which defines the purpose of the organization. What is the organization’s reason for being in business? 2. It’s also important to identify the organization’s current objectives and strategies. Copyright © 2016 Pearson Canada Inc.
12
Exhibit 9-2 Components of a Mission Statement
Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Copyright © 2016 Pearson Canada Inc.
13
The Strategic Management Process
Components of a Mission Statement Customers: Who are the firm’s customers? Markets: Where does the firm compete geographically? Concern for survival, growth, and profitability: Is the firm committed to growth and financial stability? Philosophy: What are the firm’s basic beliefs, values, and ethical priorities? Concern for public image: How responsive is the firm to societal and environmental concerns? Products or services: What are the firm’s major products or services? Technology: Is the firm technologically current? Self-concept: What are the firm’s major competitive advantage and core competencies? Concern for employees: Are employees a valuable asset of the firm? Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Components of a Mission Statement Customers: Who are the firm’s customers? Markets: Where does the firm compete geographically? Concern for survival, growth, and profitability: Is the firm committed to growth and financial stability? Philosophy: What are the firm’s basic beliefs, values, and ethical priorities? Concern for public image: How responsive is the firm to societal and environmental concerns? Products or services: What are the firm’s major products or services? Technology: Is the firm technologically current? Self-concept: What are the firm’s major competitive advantage and core competencies? Concern for employees: Are employees a valuable asset of the firm? Copyright © 2016 Pearson Canada Inc.
14
The Strategic Management Process
Step 2: Conduct an Internal Analysis The environmental scanning of specific and general internal areas including: Mission Resources Capabilities Core Competencies Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Step 2: Internal Analysis. mission A statement of an organization’s purpose resources An organization’s assets—financial, physical, human, intangible—that are used to develop, manufacture, and deliver products or services to customers. capabilities An organization’s skills and abilities that enable it to do the work activities needed in its business. core competencies An organization’s major value-creating skills, capabilities, and resources that determine its competitive advantage. Copyright © 2016 Pearson Canada Inc.
15
The Strategic Management Process
Step 2: Conduct an Internal Analysis - Terms Mission A statement of an organization’s purpose Resources An organization’s assets—financial, physical, human, intangible—that are used to develop, manufacture, and deliver products or services to customers. Capabilities An organization’s skills and abilities that enable it to do the work activities needed in its business. Core competencies An organization’s major value-creating skills, capabilities, and resources that determine its competitive advantage. Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Step 2: Internal Analysis. mission A statement of an organization’s purpose resources An organization’s assets—financial, physical, human, intangible—that are used to develop, manufacture, and deliver products or services to customers. capabilities An organization’s skills and abilities that enable it to do the work activities needed in its business. core competencies An organization’s major value-creating skills, capabilities, and resources that determine its competitive advantage. Copyright © 2016 Pearson Canada Inc.
16
The Strategic Management Process
Step 2: Conduct an Internal Analysis con’t Assessing organizational resources, capabilities, activities, and core competencies: Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage. Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Step 2: Internal Analysis. 1. Should lead to a clear assessment of the organization’s resources and capabilities. 2. Any activities the organization does well or any unique resources that it has are called strengths. 3. Weaknesses are activities the organization does not do well or resources it needs but does not possess. If any of the organizational capabilities or resources are exceptional or unique, they’re called the organization’s core competencies. 4. Organizational culture is important in internal analysis. It can promote or hinder an organization’s strategic actions. 5. Combined external and internal analyses are called SWOT analysis because it’s an analysis of the organizations’ strengths, weaknesses, opportunities, and threats. Copyright © 2016 Pearson Canada Inc.
17
The Strategic Management Process
Step 3: Conduct an External Analysis The environmental scanning of specific and general environments Focuses on identifying opportunities and threats Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Step 3: External Analysis. 1. Managers in every organization need to do an external analysis. Factors such as competition, pending legislation, and labour supply could have an impact. 2. After analyzing the environment, managers need to assess what they have learned in terms of opportunities and threats. Opportunities are positive trends in external environmental factors; threats are negative trends. 3. The same environment can present opportunities to one organization and pose threats to another in the same industry because of different resources and capabilities. Copyright © 2016 Pearson Canada Inc.
18
The Strategic Management Process
Step 3: Conduct an External Analysis con’t Assessing organizational resources, capabilities, activities, and core competencies: Opportunities Positive trends in external environmental factors. Threats Negative trends in external environmental factors. Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Copyright © 2016 Pearson Canada Inc.
19
The Strategic Management Process
SWOT: Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses, Opportunities, and Threats) Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Copyright © 2016 Pearson Canada Inc.
20
Exhibit 9-3 Identifying the Organization’s Opportunities
Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Based on the SWOT analysis, managers can identify a strategic niche that the organization might exploit (see Exhibit 9-3). Copyright © 2016 Pearson Canada Inc.
21
The Strategic Management Process
Step 4: Formulate Strategies Develop and evaluate strategic alternatives Select appropriate strategies that provide relative advantage over competitors Match organizational strengths to environmental opportunities Correct weaknesses and guard against threats Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Step 4: Formulating Strategies. 1. After the SWOT, managers develop and evaluate strategic alternatives and select strategies that are appropriate. 2. Strategies need to be established for corporate, business, and functional levels. Copyright © 2016 Pearson Canada Inc.
22
The Strategic Management Process
Step 5: Implement Strategies Implementation: effectively fitting organizational structure and activities to the environment The environment dictates the chosen strategy; effective strategy implementation requires an organizational structure matched to its requirements Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Step 5: Implementing Strategies. A strategy is only as good as its implementation. Copyright © 2016 Pearson Canada Inc.
23
Exhibit 9-4 Ways to Implement Strategy
Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Copyright © 2016 Pearson Canada Inc.
24
The Strategic Management Process
Step 6: Evaluate Results How effective have strategies been? What adjustments, if any, are necessary? Learning Outcome 2: Explain the role of managers in each of the six strategic management steps. Step 6: Evaluating Results. 1. How effective have the strategies been? Are adjustments necessary? Copyright © 2016 Pearson Canada Inc.
25
Types of Organizational Strategies
An organizational strategy that evaluates what businesses a company is in, should be in, or wants to be in, and what it wants to do with those businesses. Learning Outcome 3: Describe three types of organizational strategies. There are three different and distinct levels of strategy: corporate, business, and functional A. Corporate-level Strategy: The corporate-level strategy seeks to determine what businesses a corporation should be in or wants to be in. 1. Growth. A growth strategy seeks to increase the organization’s business by expanding the number of products offered or markets served. 2. Stability. A stability strategy is characterized by an absence of significant change. 3. Retrenchment. Retrenchment strategies are deployed when the organization is in trouble. Retrenchment strategies reduce the company’s activities or operations. 4. Corporate Portfolio Analysis. Corporate portfolio analyses are used when an organization’s corporate strategy involves a number of businesses. Copyright © 2016 Pearson Canada Inc.
26
Types of Organizational Strategies
Types of Corporate Strategies Growth: expansion into new products and markets Stability: maintenance of the status quo Renewal: address organizational weaknesses that are leading to performance declines Learning Outcome 3: Describe three types of organizational strategies. 1. Growth. A growth strategy seeks to increase the organization’s business by expanding the number of products offered or markets served. 2. Stability. A stability strategy is characterized by an absence of significant change. 3. Retrenchment. Retrenchment strategies are deployed when the organization is in trouble. Retrenchment strategies reduce the company’s activities or operations. 4. Corporate Portfolio Analysis. Corporate portfolio analyses are used when an organization’s corporate strategy involves a number of businesses. Copyright © 2016 Pearson Canada Inc.
27
Exhibit 9-5 Levels of Organizational Strategy
Learning Outcome 3: Describe three types of organizational strategies. There are three different and distinct levels of strategy: corporate, business, and functional (see Exhibit 9-5). Copyright © 2016 Pearson Canada Inc.
28
Types of Organizational Strategies
Organizational-Level Strategies Growth Strategy: Seeking to increase the organization’s business by expanding the number of products offered or markets served, either through its current business(es) or through new business(es). Learning Outcome 3: Describe three types of organizational strategies. 1. Growth. A growth strategy seeks to increase the organization’s business by expanding the number of products offered or markets served. a. Types of Growth Strategies 1) Concentration: Focusing on a primary line of business and increasing the number of products offered or markets served 2) Vertical Integration: Attempting to gain control of inputs or outputs 3) Horizontal Integration: Combining operations with another competitor in the same industry to increase competitive strengths and lower competition among industry rivals. 4) Diversification: Expanding operations Copyright © 2016 Pearson Canada Inc.
29
Types of Organizational Strategies
Types of Growth Strategies: Concentration Vertical integration Horizontal integration Diversification Learning Outcome 3: Describe three types of organizational strategies. 1. Growth. A growth strategy seeks to increase the organization’s business by expanding the number of products offered or markets served. a. Types of Growth Strategies 1) Concentration: Focusing on a primary line of business and increasing the number of products offered or markets served 2) Vertical Integration: Attempting to gain control of inputs or outputs 3) Horizontal Integration: Combining operations with another competitor in the same industry to increase competitive strengths and lower competition among industry rivals. 4) Diversification: Expanding operations Copyright © 2016 Pearson Canada Inc.
30
Types of Organizational Strategies
Growth Strategies Concentration: Concentrates on a primary line of business and increasing the number of products offered or markets served. Learning Outcome 3: Describe three types of organizational strategies. Concentration: Focusing on a primary line of business and increasing the number of products offered or markets served. Copyright © 2016 Pearson Canada Inc.
31
Types of Organizational Strategies
Vertical Integration: Backward vertical integration: attempting to gain control of inputs (become its own supplier). Forward vertical integration: an organization becomes its own distributor and is able to control its outputs. Learning Outcome 3: Describe three types of organizational strategies. Vertical Integration Backward vertical integration: attempting to gain control of inputs (become a self-supplier). Forward vertical integration: attempting to gain control of output through control of the distribution channel and/or provide customer service activities (eliminating intermediaries). Copyright © 2016 Pearson Canada Inc.
32
Types of Organizational Strategies
Horizontal Integration: A company grows by combining with other organizations in the same industry—that is, combining operations with competitors. Learning Outcome 3: Describe three types of organizational strategies. Horizontal Integration: Combining operations with another competitor in the same industry to increase competitive strengths and lower competition among industry rivals. Copyright © 2016 Pearson Canada Inc.
33
Types of Organizational Strategies
Diversification: Related Diversification - when a company grows by combining with firms in different, but related, industries. Unrelated Diversification - When a company grows by combining with firms in different and unrelated industries. Learning Outcome 3: Describe three types of organizational strategies. Diversification Related Diversification: Expanding by merging with or acquiring firms in different, but related industries that are “strategic fits.” Unrelated Diversification: Growing by merging with or acquiring firms in unrelated industries where higher financial returns are possible. Copyright © 2016 Pearson Canada Inc.
34
Types of Organizational Strategies
Corporate-Level Strategies Stability Strategy: A strategy characterized by an absence of significant change in what the organization is currently doing. Learning Outcome 3: Describe three types of organizational strategies. A stability strategy is characterized by an absence of significant change. Copyright © 2016 Pearson Canada Inc.
35
Types of Organizational Strategies
Renewal Strategy: A strategy designed to address organizational weaknesses that are leading to performance declines. Learning Outcome 3: Describe three types of organizational strategies. Retrenchment strategies are used when the organization is in trouble. Retrenchment strategies reduce the company’s activities or operations. Copyright © 2016 Pearson Canada Inc.
36
Types of Organizational Strategies
Renewal Strategy: Managers need to develop strategies that address organizational weaknesses that are leading to performance declines. There are two main types of renewal strategies, retrenchment and turnaround. Learning Outcome 3: Describe three types of organizational strategies. Retrenchment strategies are used when the organization is in trouble. Retrenchment strategies reduce the company’s activities or operations. Copyright © 2016 Pearson Canada Inc.
37
Types of Organizational Strategies
Retrenchment Strategy: A short-run renewal strategy. Learning Outcome 3: Describe three types of organizational strategies. Retrenchment strategies are used when the organization is in trouble. Retrenchment strategies reduce the company’s activities or operations. Copyright © 2016 Pearson Canada Inc.
38
Types of Organizational Strategies
Retrenchment Strategy: Reduces the company’s activities or operations Retrenchment strategies include: Cost reductions Layoffs Closing underperforming units Closing entire product lines or services Learning Outcome 3: Describe three types of organizational strategies. Retrenchment strategies are used when the organization is in trouble. Retrenchment strategies reduce the company’s activities or operations. Copyright © 2016 Pearson Canada Inc.
39
Types of Organizational Strategies
Turnaround Strategy: A renewal strategy for situations in which the organization’s performance problems are more serious.. Learning Outcome 3: Describe three types of organizational strategies. Retrenchment strategies are used when the organization is in trouble. Retrenchment strategies reduce the company’s activities or operations. Copyright © 2016 Pearson Canada Inc.
40
How Are Corporate Strategies Managed?
Corporate Portfolio Analysis BCG Matrix Developed by the Boston Consulting Group Considers market share and industry growth rate Classifies firms as: Cash cows: low growth rate, high market share Stars: high growth rate, high market share Question marks: high growth rate, low market share Dogs: low growth rate, low market share Learning Outcome 3: Describe three types of organizational strategies. Corporate Portfolio Analysis. Used when an organization’s corporate strategy involves a number of businesses. BCG Matrix helps to identify which businesses offer high potential and which are a drain on organizational resources. Copyright © 2016 Pearson Canada Inc.
41
Exhibit 9-6 The BCG Matrix and Strategic Implications
Learning Outcome 3: Describe three types of organizational strategies. The first portfolio matrix—the BCG matrix—developed by the Boston Consulting Group, introduced the idea that an organization’s businesses could be evaluated and plotted using a 2 x 2 matrix (see Exhibit 9-6) to identify which ones offered high potential and which were a drain on organizational resources. The horizontal axis represents market share, which was evaluated as either low or high; and the vertical axis indicates anticipated market growth, which also was evaluated as either low or high. Based on its evaluation, businesses can be placed in one of four categories. Copyright © 2016 Pearson Canada Inc.
42
Creating Strategic Competitive Advantage
Competitive Strategy: An organizational strategy that focuses on how the organization will compete in each of its businesses. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Competitive strategy An organizational strategy that focuses on how the organization will compete in each of its businesses. For a small organization in only one line of business or for a large organization that has not diversified into different products or markets, the competitive strategy simply describes how the company will compete in its primary or main market. For organizations in multiple businesses, however, each division will have its own competitive strategy that defines its competitive advantage, the products or services it will offer, the customers it wants to reach, and the like. Copyright © 2016 Pearson Canada Inc.
43
Creating Strategic Competitive Advantage
Strategic Business Units (SBUs) : Single businesses of an organization in several different businesses that are independent and formulate their own strategies. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. When an organization is in several different businesses, these single businesses that are independent and formulate their own strategies are often called strategic business units (SBUs). Copyright © 2016 Pearson Canada Inc.
44
Creating Strategic Competitive Advantage
What sets an organization apart: its distinct edge. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Competitive advantage is what sets an organization apart, that is, its distinct edge. These come from the firm’s core competencies. Quality as a Competitive Advantage. If implemented properly, quality can be a way for an organization to create a sustainable competitive advantage. Copyright © 2016 Pearson Canada Inc.
45
Creating Strategic Competitive Advantage
Quality as a Competitive Advantage: Differentiates the firm from its competitors. Can create a sustainable competitive advantage. Represents the company’s focus on quality management to achieve constant improvement and meet customers’ demand for quality and reliability. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Competitive advantage is what sets an organization apart, that is, its distinct edge. These come from the firm’s core competencies. Quality as a Competitive Advantage. If implemented properly, quality can be a way for an organization to create a sustainable competitive advantage. Copyright © 2016 Pearson Canada Inc.
46
Creating Strategic Competitive Advantage
Competitive Strategies In any industry, five competitive forces dictate the rules of competition. Together, these five forces determine industry attractiveness and profitability. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Copyright © 2016 Pearson Canada Inc.
47
Creating Strategic Competitive Advantage
Five Competitive Forces Threat of New Entrants The ease or difficulty with which new competitors can enter an industry. Threat of Substitutes The extent to which switching costs and brand loyalty affect the likelihood of customers adopting substitute products and services. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Porter says there are five competitive forces at work in an industry. Competitive strategies developed out of the work of Michael Porter. His framework suggests that managers can choose from among three generic strategies. Porter’s major contribution has been to carefully outline how managers can create and sustain a competitive strategy in order to earn above-average profitability. a. Industry analysis is an important step in Porter’s framework. He says there are five competitive forces at work in an industry. 1) Threat of new entrants is determined by barriers to entry, which are factors that determine how easy or hard it is for new competitors to enter an industry. 2) Threat of substitutes is a factor that determines whether or not customers will switch their business to a competitor. 3) Bargaining power of buyers is a factor that determines the amount of influence that buyers have in an industry. Copyright © 2016 Pearson Canada Inc.
48
Creating Strategic Competitive Advantage
Bargaining Power of Buyers The degree to which buyers have the market strength to hold sway over and influence competitors in an industry. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Copyright © 2016 Pearson Canada Inc.
49
Creating Strategic Competitive Advantage
4. Bargaining Power of Suppliers Degree of supplier concentration and availability of substitute inputs determine the amount of power that suppliers have over firms in the industry.. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Bargaining power of suppliers is a force that determine the power that suppliers have over firms in the industry. Copyright © 2016 Pearson Canada Inc.
50
Creating Strategic Competitive Advantage
5. Current Rivalry Intensity among rivals increases when industry growth rates slow, demand falls, and product prices descend. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. 5. Current rivalry includes factors that determine how intense the competitive rivalry will be among firms currently in the industry. Copyright © 2016 Pearson Canada Inc.
51
Creating Strategic Competitive Advantage
Choosing a Competitive Strategy Once managers have assessed the five forces and determined what threats and opportunities exist, they are ready to select an appropriate competitive strategy. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Copyright © 2016 Pearson Canada Inc.
52
Creating Strategic Competitive Advantage
Competitive Strategies Cost Leadership Strategy The organization sets out to be the lowest-cost producer in its industry. Differentiation Strategy A company seeks to offer unique products that are widely valued by customers. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. A. A cost leadership strategy is the strategy an organization follows when it wants to be the lowest-cost producer in the industry. The differentiation strategy is the strategy a firm follows when it wants to be unique in its industry along dimensions valued by buyers. Copyright © 2016 Pearson Canada Inc.
53
Creating Strategic Competitive Advantage
Focus Strategy A company pursues a cost or differentiation advantage in a narrow industry segment. Stuck in the Middle An organization is unable to develop a competitive advantage through cost or differentiation. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. C. The focus strategy is the strategy a company follows when it pursues a cost or differentiation advantage in a narrow industry segment. D. Porter proposed that a firm could not successfully pursue a combination of these competitive strategies and used the term stuck in the middle to describe organizations that cannot compete through cost leadership, differentiation, or focus strategies. However, a growing number of research studies have shown that a dual emphasis on low costs and differentiation can result in high performance. This approach isn’t easy to implement, however. Copyright © 2016 Pearson Canada Inc.
54
Creating Strategic Competitive Advantage
Functional strategy: A strategy used by a functional department to support the business strategy of the organization. Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. Copyright © 2016 Pearson Canada Inc.
55
Creating Strategic Competitive Advantage
Functional-level strategies are the strategies used by an organization’s various functional departments……. Marketing, human resources, research and development, and finance all support competitive strategy Problems occur when employees or customers don’t understand a company’s strategy Learning Objective 4. Describe competitive advantage and the competitive strategies organizations use to get it. The functional-level strategy seeks to determine how to support the business-level strategy. Copyright © 2016 Pearson Canada Inc.
56
Current Strategic Management Issues
Strategic Flexibility: The ability to recognize major external environmental changes, to quickly commit resources, and to recognize when a strategic decision was a mistake. Learning Objective 5. Discuss current strategic management issues. Copyright © 2016 Pearson Canada Inc.
57
Current Strategic Competitive Advantage
New Directions in Organizational Strategies: E-Business Strategies Cost Leadership: Online activities: bidding, order processing, inventory control, recruitment, and hiring. Learning Objective 5. Discuss current strategic management issues. Strategies for Applying E-business Techniques 1. Cost Leadership. Online activities: bidding, order processing, inventory control, recruitment, and hiring. 2. Differentiation. Internet-based knowledge systems, online ordering, and customer support. 3. Focus. Chat rooms and discussion boards, targeted web sites. Copyright © 2016 Pearson Canada Inc.
58
Current Strategic Competitive Advantage
Differentiation: Internet-based knowledge systems, online ordering, and customer support. Focus: Chat rooms and discussion boards, targeted web sites. Learning Objective 5. Discuss current strategic management issues. Strategies for Applying E-business Techniques 2. Differentiation. Internet-based knowledge systems, online ordering, and customer support. 3. Focus. Chat rooms and discussion boards, targeted web sites. Copyright © 2016 Pearson Canada Inc.
59
Current Strategic Competitive Advantage
Customer Service Strategies Giving the customers what they want Communicating effectively with them Providing employees with customer service training Learning Objective 5. Discuss current strategic management issues. Customer Service Strategies. These strategies give customers what they want, communicate effectively with them, and provide employees with customer service training. Copyright © 2016 Pearson Canada Inc.
60
Current Strategic Competitive Advantage
Innovation Strategies Possible Events Not always radical breakthroughs in products Application of existing technology to new uses Strategic Decisions about Innovation Basic scientific research Product development Process innovation Learning Objective 5. Discuss current strategic management issues. Innovation Strategies. Can focus on breakthrough products or then can include the application of existing technology to new uses. An organization that is first to bring a product innovation to the market or to use a new process innovation is called a first mover. Copyright © 2016 Pearson Canada Inc.
61
Current Strategic Competitive Advantage
First Mover: An organization that is first to bring a product innovation to the market or to use a new process innovation Learning Objective 5. Discuss current strategic management issues. Innovation Strategies. Can focus on breakthrough products or then can include the application of existing technology to new uses. An organization that is first to bring a product innovation to the market or to use a new process innovation is called a first mover. Copyright © 2016 Pearson Canada Inc.
62
Exhibit 9-7 First-Mover Advantages
Learning Objective 5. Discuss current strategic management issues. An organization that’s first to bring a product innovation to the market or to use a new process innovation is called a first mover. Being a first mover has certain strategic advantages and disadvantages as shown in Exhibit 9-7. Copyright © 2016 Pearson Canada Inc.
63
Summary and Implications
Explain the role of strategic management and why it is important. The role of strategic management concerns the set of managerial decisions and actions that determines the long-run performance of an organization. Learning Outcome 1 Copyright © 2016 Pearson Canada Inc.
64
Summary and Implications
Explain the role of managers in each of the six strategic management steps. Is a six-step process that encompasses planning, implementation and evaluation. Learning Outcome 2 Copyright © 2016 Pearson Canada Inc.
65
Summary and Implications
Describe three types of organizational strategies. Three types of organizational strategies: corporate, business and functional. Learning Outcome 3 Copyright © 2016 Pearson Canada Inc.
66
Summary and Implications
Describe competitive advantage and the competitive strategies organizations use to get it. - An organization’s competitive advantage is what sets it apart, its distinctive edge. - Becomes the basis for choosing an appropriate competitive strategy. Learning Outcome 4 Copyright © 2016 Pearson Canada Inc.
67
Summary and Implications
Discuss current strategic management issues. Managers face more uncertainty and risk and greater change in today’s continually changing environment, making it necessary to scan the environment more frequently and adjust strategy accordingly. Learning Outcome 5 Copyright © 2016 Pearson Canada Inc.
Similar presentations
© 2024 SlidePlayer.com. Inc.
All rights reserved.