1. Managing Strategy and Strategic Planning Chapter 08 Peshawar City Institute Of Modern Sciences

2. Managing Strategy and Strategic Planning2 The Nature of Strategic Management Strategy A way of approaching business opportunities and challenges. Strategic Management A comprehensive and ongoing management process aimed at formulating and implementing effective strategies; a way of approaching business opportunities and challenges. Effective Strategy A strategy that promotes a superior alignment between the organization and its environment and the achievement of strategic goals. Peshawar City Institute Of Modern Sciences

3. Managing Strategy and Strategic Planning3 The Nature of Strategic Management The Components of Strategy  Distinctive Competence An organizational strength possessed by only a small number of competing firms.  Scope When applied to strategy, it specifies the range of markets in which an organization will compete.  Recourse Deployment How an organization distributes its resources across the areas in which it competes. Peshawar City Institute Of Modern Sciences

4. Managing Strategy and Strategic Planning4 The Nature of Strategic Management Types of Strategic Alternatives Business-Level Strategies The set of strategic alternatives from which an organization chooses as it conducts business in a particular industry or market. Corporate-Level Strategies The set of strategic alternatives from which an organization chooses as it managers its operations simultaneously across several industries and several markets. Peshawar City Institute Of Modern Sciences

5. Managing Strategy and Strategic Planning5 The Nature of Strategic Management Strategy Formulation and Implementation  Strategy Formulation The set of processes involved in creating or determining the strategies of the organization; it focuses on the content of strategies.  Strategy Implementation The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved. Peshawar City Institute Of Modern Sciences

6. Managing Strategy and Strategic Planning6 The Nature of Strategic Management Strategy Formulation and Implementation  Deliberate Strategy A plan of action that an organization chooses and implements to support specific goals.  Emergent Strategy A pattern of action that develops over time in an organization in the absence of mission and goals or despite mission and goals. Peshawar City Institute Of Modern Sciences

7. Managing Strategy and Strategic Planning7 Using SWOT Analysis to Formulate Strategy  Strengths  Weaknesses  Opportunities  Threats Internal Analysis External Analysis Peshawar City Institute Of Modern Sciences

8. Managing Strategy and Strategic Planning8 Using SWOT Analysis to Formulate Strategy Evaluating an Organization’s Strengths  Organizational Strength: A skill or capability that enables an organization to conceive of and implement its strategies. Strategic Imitation: The practice of duplicating another organization’s distinctive competence and thereby implementing a valuable strategy. Sustained Competitive Advantage: A competitive advantage is a competitive advantage that exists after all attempts at strategic imitation have ceased. Peshawar City Institute Of Modern Sciences

9. Managing Strategy and Strategic Planning9 Using SWOT Analysis to Formulate Strategy Evaluating an Organization’s Weaknesses  Organizational Weakness: A skill and capability that does not enable an organization to choose and implement strategies that support its mission. Competitive Disadvantage: A situation in which an organization is not implementing valuable strategies that are being implemented by competing organizations. Peshawar City Institute Of Modern Sciences

10. Managing Strategy and Strategic Planning10 Using SWOT Analysis to Formulate Strategy Evaluating an Organization’s Opportunities and Threats Organizational Opportunities: An area in the environment that, if exploited, may generate high performance. Organizational Threats: An area in the environment that increases the difficulty of organization's achieving high performance Peshawar City Institute Of Modern Sciences

11. Managing Strategy and Strategic Planning11 Mission An organization’s fundamental purpose SWOT Analysis To formulate strategies that support the strategies Those that support the mission and Exploit opportunities and strengths Neutralize threats Avoid weaknesses Internal AnalysisExternal Analysis Strengths Weaknesses Threats Opportunities Good Strategies SWOT Analysis Peshawar City Institute Of Modern Sciences

12. Managing Strategy and Strategic Planning12 Formulating Business-Level Strategies Three Important Classification of Business Level Strategies: 1. Porter’s Generic Strategies 2. Miles and Snow Typology 3. Strategies Based on Product Life Cycle (PLC) Peshawar City Institute Of Modern Sciences

13. Managing Strategy and Strategic Planning13 Formulating Business-Level Strategies Porter’s Generic Strategies 1. Differentiation Strategy A strategy in which an organization seeks to distinguish itself from competitors through the quality of its products or services. 2. Overall Cost Leadership Strategy A strategy in which an organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms. 3. Focus A strategy in which an organization concentrates on a specific regional market, product line, or group of buyers. Peshawar City Institute Of Modern Sciences

14. Managing Strategy and Strategic Planning14 Formulating Business-Level Strategies The Miles and Snow Typology 1. Prospector Strategy A strategy in which the firm encourages creativity and flexibility and is often decentralized. 2. Defender Strategy A strategy in which a firm focuses on lowering costs and improving the performance of current products. 3. Analyzer Strategy A strategy in which the firm attempts to maintain its current business and to be somewhat innovative in new businesses. 4. Reactor Strategy A strategy in which a firm has no consistent approach to strategy. Peshawar City Institute Of Modern Sciences

15. Managing Strategy and Strategic Planning Formulating Business-Level Strategies Prospector Stress innovation and growth; seek new opportunities Dynamic, growing environment characterized by high uncertainty and risk Moderately stable environment with some uncertainty and risk Very stable environment with little uncertainty and risk Reactor Little consideration of environment; drift with little concern for strategy Analyzer Stress maintenance of status quo with moderate innovation and growth Defender Stress stability, conservatism, and maintenance of status quo Peshawar City Institute Of Modern Sciences

16. Managing Strategy and Strategic Planning16 Formulating Business-Level Strategies Strategies Based on Product Life Cycle (PLC) Product Life Cycle A model that portrays how sales volume for products changes over the life of products. Peshawar City Institute Of Modern Sciences

17. Managing Strategy and Strategic Planning17 Formulating Business-Level Strategies Introduction Time Stages GrowthMaturityDecline High Low Sales Volume Peshawar City Institute Of Modern Sciences

18. Managing Strategy and Strategic Planning18 Implementing Business-Level Strategies Implementing Porter’s Generic Strategies  Differentiation Strategy Marketing should focus on high quality and high- value image of the organization. Accounting and finance should focus on control on funds without discouraging creativity. Organization culture should focus on creativity, innovation and response to customer needs in every function of the organization.. Peshawar City Institute Of Modern Sciences

19. Managing Strategy and Strategic Planning19 Implementing Business-Level Strategies Implementing Porter’s Generic Strategies  Overall Cost Leadership Strategy Marketing should focus on simple product attributes and should reduce the cost for achieving economies of scale. Accounting and finance should focus on tight accounting and financial control. Manufacturing should focus on buying raw material at cheaper prices, minimize manufacturing waste and achieving economies of scale. Organization culture should focus on improving efficiency in every function of the organization. Peshawar City Institute Of Modern Sciences

20. Managing Strategy and Strategic Planning20 Implementing Business-Level Strategies Implementing Miles and Snow Strategies  Prospector Strategy Prospector strategy can be achieved through innovation, seek new market opportunities, and take numerous risks.  Defender Strategy Defender strategy can be achieved through protecting the market from new competitors. Low prices and improved performance of the product can be an effective strategy.  Analyzer Strategy Analyzer strategy can be used to maintain current business and innovate new ones. Effective marketing, tight accounting systems and strong culture should be maintained while search for new markets should be a focus too. Peshawar City Institute Of Modern Sciences

21. Managing Strategy and Strategic Planning21 Formulating Corporate-Level Strategies Most large organizations are engaged in several businesses, industries, and markets. Each business or set of business within such an origination is frequently referred to as a Strategic Business Unit (SBU). Diversification The number of different businesses that an organization is engaged in and the extent to which these businesses are related to one another. Peshawar City Institute Of Modern Sciences

22. Managing Strategy and Strategic Planning22 Formulating Corporate-Level Strategies Single-Product Strategy A strategy in which organization manufactures just one product or service and sells in in a single geographic market. Peshawar City Institute Of Modern Sciences

23. Managing Strategy and Strategic Planning23 Formulating Corporate-Level Strategies Related Diversification A strategy in which an organization operates several businesses that are linked to one another. Bases of Relatedness  Similar technology  Common distribution and marketing skills  Common brand name and reputation  Common customers Advantages 1. Reduce organization’s dependencies 2. Reduce overhead cost 3. Exploitation of strengths and capabilities in more then one business Peshawar City Institute Of Modern Sciences

24. Managing Strategy and Strategic Planning24 Formulating Corporate-Level Strategies Unrelated Diversification A strategy in which an organization operates several businesses that are not associated. Advantages 1. If one business is in the decline stage the other business may enjoy growth stage. So resources can be used in the business where they have the high potential 2. Using different unrelated business may create greater synergy. Peshawar City Institute Of Modern Sciences

25. Managing Strategy and Strategic Planning25 Implementing Corporate-Level Strategies Becoming a Diversified Firm  Development of New Products  Replacement of Suppliers and Customers Backward Vertical Integration: An organization's beginning the business activities formally conducted by its suppliers. Forward Vertical Integration: An organization's beginning the business activities formally conducted by its customers.  Mergers and Acquisitions Merger: The purchase of one form by another firm of approximately the same size. Acquisition: The purchase of a firm by a firm considerably larger. Peshawar City Institute Of Modern Sciences

26. Managing Strategy and Strategic Planning26 Implementing Corporate-Level Strategies Managing Diversification Portfolio Management Technique A method that diversified organizations use to determine which business to engage in and how to manage these businesses to maximize corporate performance. Two important portfolio management techniques are:  BCG Matrix  GE Business Screen Peshawar City Institute Of Modern Sciences

27. Managing Strategy and Strategic Planning27 Implementing Corporate-Level Strategies Stars Question Marks DogsCash Cows Relative Market Share Relative Market Growth High Low High Low The Boston Consulting Group (BCG) Matrix Managing Diversification Peshawar City Institute Of Modern Sciences

28. Managing Strategy and Strategic Planning28 Implementing Corporate-Level Strategies Managing Diversification Competitive Position 1.Market share 2.Technological know-how 3.Product quality 4.Service network 5.Price competitiveness 6.Operating costs Industry Attractiveness 1.Market growth 2.Market size 3.Capital requirements 4.Competitive intensity Winner Profit Producer Winner Question Mark Average Business Loser GoodMediumPoor Medium High Low Competitive Position Industry Attractiveness The General Electric (GE) Business Screen Peshawar City Institute Of Modern Sciences