1. MG 506 (Fall 1999: Class 3) 9/29/99 Tuesday, September 28, 1999 n Term project n Cases/teams n Strategic Management n Web sites: –FaxSav, audible n Case: Dell

2. MG 506 (Fall 1999: Class 3) 9/29/99 Levels of Strategy n Corporate planning: Business selection and resource allocation n Business planning: Development of a sustainable competitive advantage in a business unit n Product planning: Development of a marketing plan for a product or service

3. MG 506 (Fall 1999: Class 3) 9/29/99 Stakeholders n Groups and individuals who can affect, or are affected by, the achievement of an organization’s goals, e.g., –Customers –Employees –Unions –Interest groups –stockholders

4. MG 506 (Fall 1999: Class 3) 9/29/99 Corporate Strategic Planning n Define the mission n Establish strategic business units (SBUs) n Assign resources to SBUs n Plan new businesses

5. MG 506 (Fall 1999: Class 3) 9/29/99 Mission n Vision for the company - Defines its future direction n Shaped by: –History –Owner/management preferences –Market environment –Resources –Distinctive competencies

6. MG 506 (Fall 1999: Class 3) 9/29/99 Strategic Business Units n A strategically effective competitor n Can group by customer groups, customer needs, technology n GE criteria: –Single business/set of related businesses –Own set of competitors –Manager responsible for planning and performance

7. MG 506 (Fall 1999: Class 3) 9/29/99 Portfolio Planning n Boston Consulting Group (BCG) matrix –Cash flow is a measure of business success –Cash generation is a function of market share –Cash use is a function of market growth rate

8. MG 506 (Fall 1999: Class 3) 9/29/99 BCG Matrix StarProblem Child Cash Cow Dog Relative Market Share Mkt Growth Rate High Low

9. MG 506 (Fall 1999: Class 3) 9/29/99 Considerations n Balance among market opportunities and cash flow n Do you have the business strength to deal with question marks? n Can dogs represent cash flow opportunities?

10. MG 506 (Fall 1999: Class 3) 9/29/99 Strategies n Build n Hold n Harvest n Divest

11. MG 506 (Fall 1999: Class 3) 9/29/99 GE Matrix n Nine cells n Industry attractiveness n Business strength n 3 zones –Green –Yellow –Red

12. MG 506 (Fall 1999: Class 3) 9/29/99 Benefits of Portfolio Planning n Potential to facilitate broad business definition n Clarifies expectations n Manageable portfolios n Legitimizes different expectations for different businesses n Legitimizes divestiture

13. MG 506 (Fall 1999: Class 3) 9/29/99 Potential Problems n May fall into simplistic decision making n Difficult to generate enthusiasm in SBUs not targeted for growth n May not control expenses in stars and question marks n Mobility of classification

14. MG 506 (Fall 1999: Class 3) 9/29/99 Business Strategy n Situation Analysis –Internal n Strengths n Weaknesses –External n Opportunities n Threats

15. MG 506 (Fall 1999: Class 3) 9/29/99 Industry Analysis (Porter) Threat of Entry Power of Customers Power of Suppliers Intensity of Rivalry Threat of Substitution

16. MG 506 (Fall 1999: Class 3) 9/29/99 Generic Strategies Lower CostDifferentiation Broad Target Market Narrow Target Market Cost Leadership Differentiation Differentiation Focus Cost Focus