Professional Documents
Culture Documents
ADDITIONAL MATERIALS
WSIZ 2010/2011
Learning Objectives:
By the end of this course, students will have the ability to
STRATEGIC MANAGEMENT
The Nature of Strategic Management
Strategic
g Management
g
Defined
Strategy Formulation
Vi i & Mission
Vision
Mi i
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term
Long
Term Objectives
Alternative Strategies
Strategy Selection
Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource
esou ce Allocation
ocat o
Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective
Co
ect e Actions
ct o s
Achieving
g Sustained
Competitive Advantage
1. Adapting to change in external trends,
internal capabilities
p
and resources
Adapting
g to Change
g Key
y
Strategic Management
Questions
What kind of business
should we become?
Are we in the right fields
Are there new competitors
p
What strategies should we
pursue?
How are our customers
changing?
Key
y Terms
Vision Statement
What do we want to become?
Mission Statement
What is our business?
Key
y Terms
Economic
Social
Cultural
Demographic/Environmental
Technological
Competitors
Key
y Terms
M
Management
t
Marketing
Finance/Accounting
Production/Operations
Key
y Terms
Strategies
Means by which long-term objectives are
achieved
Chapter 3
Vision
&
Mission
Chapter 2
Long-Term
g
Objectives
Generate,
Evaluate,
Select
Strategies
Implement
p
Strategies:
Mgmt Issues
Implement
Strategies:
Marketing,
Fin/Acct,
R&D, CIS
Measure &
Evaluate
Performance
Chapter
p 5
Chapter
p 6
Chapter
p 7
Chapter
p 8
Chapter
p 9
Internal
Audit
Chapter 4
Benefits of Strategic
g
Management
Financial Benefits
Improvement in sales
Improvement
I
t in
i profitability
fit bilit
Productivity improvement
Benefits of Strategic
g
Management
Non-Financial Benefits
Improved understanding of competitors strategies
Enhanced awareness of threats
Reduced resistance to change
Enhanced
E h
d problem-prevention
bl
i
capabilities
bili i
Advantages
g of International
Operations
Absorb excess capacity
Reduce unit costs
Spread risk over wider markets
Low-cost production facilities
Disadvantages
g of International
Operations
Difficult communications
Underestimate foreign competition
Cultural barriers to effective management
Complications arising from currency
differences
STRATEGIC MANAGEMENT
The Business Vision & Mission
To
o be the
t e first
st choice
c o ce in the
t ep
printed
ted
communications business. The first choice
is the best choice, and being the best is
what Atlanta Web pledges to work hard at
beingevery day!
Mission Statement
What is o
ourr b
business?
siness?
Mission Statements
Enduring
g statement of p
purpose
p
Distinguishes one firm from another
Declares the firms reason for being
Importance of Mission
Benefits from a strong mission
Unanimity of Purpose
Resource Allocation
Mission
Organizational Climate
Focal point for work
structure
Social Policy
y & Mission
Customers
Products
Services
Markets
Technology
Employees
Mission
Mi
i
Elements
Survival
Growth
Profit
Public
Image
Self-Concept
Philosophy
Customers
Products
Services
Markets
Concern for
Survival,
Growth,
Profitability
PepsiCo
Yes
No
No
Yes
No
No
Yes
Yes
Yes
No
Organization
Technology
Philosophy
SelfConcept
Concern for
Public Image
Concern for
Employees
PepsiCo
Yes
No
No
No
No
Yes
Yes
Yes
Organization
STRATEGIC MANAGEMENT
The External Assessment
External Strategic
g
Management Audit
Key
External
Forces
Competitors
Suppliers
Distributors
Creditors
C t
Customers
Employees
Communities
Managers
Stockholders
Labor Unions
Special Interest Groups
Products
Services
Opportunities
&
Threats
Performing
e o
g External
te a Audit
ud t
Long-term orientation
External
Factors
Measurable
Applicable
A
li bl to
t
competing firms
Hi
Hierarchical
hi l
Industry Properties
Economies of Scale
Barriers to market entry
Product differentiation
Level of competitiveness
Aging population
Less Caucasian
Widening
Wid i gap b
between
t
rich
i h & poor
2025 = 18.5% population >65 years
2075 = no ethnic or racial majority
Childbearing rates
Number of special interest groups
Number of marriages & divorces
Number of births & deaths
Immigration & emigration rates
Competitive Forces
Identifying Rival Firms
Strengths
Weaknesses
Capabilities
Opportunities
Threats
Objectives
Obj ti
Strategies
Competitive Forces
7 Characteristics of most
Competitive U
U.S.
S Firms:
1 Market share matters
1.
2. Understand what business you are in
3. Broke or not, fix it
4. Innovate or evaporate
Competitive Forces
7 Characteristics of most
Competitive U
U.S.
S Firms:
5 Acquisition is essential to growth
5.
6. People make a difference
7. No substitute for quality
Bargaining power
of suppliers
Rivalry among
competing firms
Bargaining power
of consumers
Ga
Gain & maintain
a ta e
exports
po ts to ot
other
e
nations
Defend domestic markets against
imported goods
Demographic
Governmental
Social
Environmental
Technological
Cultural
Political
Competitive
Rating
Wtd
Score
0.10
0.30
0.10
0
0
0.30
0
30
0.05
0.10
4. Chi
4
China entered
d WTO
WTO; llowered
d taxes
for importing PCs
0.10
0.10
5. The average
g income for PC worker
has declined from $40K/yr to $30k/yr
0 05
0.05
0 15
0.15
Opportunities
Rating
Wtd
Score
0.05
0.10
0.05
0.15
0.05
0.05
Threats
0.10
0.10
0.10
0.05
Opportunities (contd)
Rating
Wtd
Score
0 10
0.10
0 20
0.20
0.05
0.05
0.05
0.15
0 05
0.05
0 20
0.20
0.05
0.15
Threats (contd)
Rating
Wtd
Score
0.05
0.10
0.05
0.15
Total
1.00
Threats (contd)
(cont d)
2.40
Industry
y Analysis
y
EFE
T t l weighted
Total
i ht d score off 4.0
40
Organization response is outstanding to threats
and weaknesses
Gateway
Apple
Dell
Wt
Rating
Wtd
Score
Ratin
g
Wtd
Score
Rating
Wtd
Score
Market share
0.15
0.45
0.30
0.60
e to y sys
Inventory
0.08
0
08
0.16
0
6
0.16
0
6
0.32
0
3
Fin position
0.10
0.20
0.30
0.30
Prod. Quality
0.08
0.24
0.32
0.24
Cons. Loyalty
0.02
0.06
0.06
0.08
Sales Distr
0.10
0.30
0.20
0.30
Gl b l E
Global
Exp.
0 15
0.15
0 45
0.45
0 30
0.30
0 60
0.60
Org. Structure
0.05
0.15
0.15
0.15
CSFs
Gateway
Dell
Rating
Wtd
Score
Ratin
g
Wtd
Score
Rating
Wtd
Score
0.12
0.12
0.12
co
e ce
E-commerce
0.10
0
0
0.30
0
30
0.30
0
30
0.30
0
30
0.30
0.20
0.40
Price
competitive
0 02
0.02
0 08
0.08
0 02
0.02
0 06
0.06
Mgt.
experience
p
0.01
0.02
0.04
0.02
Total
1.00
CSFs (contd)
Wt
Apple
2.83
2.47
3.49
STRATEGIC MANAGEMENT
The Internal Assessment
Internal strengths/weaknesses
External opportunities/threats
Clear statement of mission
Internal Audit
Parallels p
process of external audit
Information from:
Management
Marketing
Finance/accounting
Production/operations
Research
R
h&D
Development
l
t
Management information Systems
1. Physical resources
2. Human resources
3. Organizational resources
Rare
Hard to imitate
Not easily substitutable
Integrating
g
g Strategy
gy & Culture
Organizational Culture
Legends
g
Heroes
Symbols
Cultural
Products
Myths
Rites
Rituals
Management
Function
Planning
Strategy Formulation
Organizing
Strategy Implementation
M ti ti
Motivating
Strategy Implementation
Staffing
Strategy Implementation
Controlling
Strategy Evaluation
Marketing
g
Customer Needs/Wants for Products/Services
1. Defining
2. Anticipating
3 Creating
3.
4. Fulfilling
Marketing
g
Marketing Functions
1. Customer analysis
2. Selling products/services
3. Product & service planning
4 Pricing
4.
5. Distribution
6 Marketing
6.
M k ti
research
h
7. Opportunity analysis
Finance/Accounting
g
Finance/Accounting Functions
Production/Operations
Production/Operations Functions
Process
Capacity
Inventory
y
Workforce
Quality
Management
g
Information
Systems
Information Systems
CIO/CTO
Security
User friendly
User-friendly
E-commerce
Rating
Wtd
Score
0.05
0.40
0.05
0.15
0.05
0.15
0 10
0.10
0 40
0.40
0.05
0.15
Strengths
Rating
Wtd
Score
0.10
0.30
0.05
0.20
8. E
8
Economies
i off scale,
l the
h 6th largest
l
PC
maker I the world
0.05
0.20
9. G
9
Gateway
y retails stores excellent
0.05
0
05
0.15
0
5
Strengths (contd)
Rating
Wtd
Score
0.05
0.15
0.10
0.05
0.025
0.10
4. No niche market
0.025
0.05
Weaknesses
Rating
Wtd
Score
0.10
0.20
0.05
0.10
0.10
0.20
TOTAL
1.00
Weaknesses (contd)
2.85
STRATEGIC MANAGEMENT
Strategies in Action
Long-Term
g
Objectives
j
Objectives -Quantifiable
Measurable
Realistic
R li ti
Understandable
Challenging
Long-Term
g
Objectives
j
Objectives -Hierarchical
Obtainable
Congruent
Time-line
Long-Term Objectives
Varying Performance Measures
b Organizational
by
O
i ti
l Level
L
l
Organizational
Basis for Annual Bonus/Merit Pay
y
Level
Corporate
Division
Function
Types
y
of Strategies
g
A Large Company
Corp
Level
Division Level
F
Functional
i
l Level
L
l
Operational Level
Types
y
of Strategies
g
Forward
Integration
Vertical
Integration
Strategies
Backward
Integration
Horizontal
Integration
Types
y
of Strategies
g
Market
Penetration
Intensive
Strategies
Market
Development
Product
Development
Types
y
of Strategies
g
Concentric
Diversification
Diversification
Strategies
Conglomerate
Diversification
Horizontal
Diversification
Types
y
of Strategies
g
Retrenchment
Defensive
Strategies
Divestiture
Liquidation
2003 Examples
Forward
Integration
Backward
Integration
Horizontal
Integration
Callaway
y Golf recently
y acquired
q
Top-Flite Golf Company
2003 Examples
Market
Penetration
Market
Development
Product
Development
GM developing hydrogen
powered automobiles or Pfizer
developing a new antismoking
pill
2003 Examples
Concentric
Diversification
Conglomerate
Diversification
Horizontal
Diversification
2003 Examples
Retrenchment
Divestiture
Liquidation
Differentiation Strategies
F
Focus
Strategies
St t i
Recent Mergers
Acquiring Firm
IBM
Yahoo
U.S. Steel
Pfizer
Krispy Kreme
Doughnuts
Oracle
Palm
Nike
Acquired Firm
R ti
Rational
lS
Software
ft
Corp
C
Inktomi Corp
National Steel Corp
Pharmacia
Montana Mills
People Soft
Handspring
Converse
Outsourcing
Business-process outsourcing
(BPO)
STRATEGIC MANAGEMENT
Strategy Analysis & Choice
Ch 6 -95
Strategy
St
ategy Analysis
a ys s & C
Choice
o ce
Nature of Strategy Analysis & Choice
-- Establishing long
long-term
term objecti
objectives
es
-- Generating alternative strategies
-- Selecting strategies to pursue
-- Best alternative - achieve mission & objectives
Ch 6 -96
Comprehensive Strategy-Formulation
gy
Framework
Stage 1:
The Input Stage
Stage 2:
The Matching Stage
Ch 6 -97
Stage 3:
The Decision Stage
Strategy-Formulation Analytical
F
Framework
k
Internal Factor Evaluation
Matrix (IFE)
Stage 1:
The Input Stage
Ch 6 -98
Strategy-Formulation Analytical
F
Framework
k
SWOT Matrix
SPACE Matrix
Stage 2:
The Matching Stage
BCG Matrix
IE Matrix
Ch 6 -99
SWOT Matrix
Four Types of Strategies
Strengths-Opportunities
St
th O
t iti (SO)
Weaknesses-Opportunities (WO)
Strengths-Threats (ST)
Weaknesses-Threats
Weaknesses Threats (WT)
Ch 6 -100
SO Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 6 -101
SO
Strategies
Use a firms
internal strengths
to take advantage
of external
opportunities
t iti
WO Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 6 -102
WO
Strategies
Improving internal
weaknesses by
taking advantage
of external
opportunities
t iti
ST Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 6 -103
ST
Strategies
Use a firms
strengths
to avoid or
reduce the impact
of external
threats
WT Strategies
Strengths
Weaknesses
Opportunities
Threats
SWOT
Ch 6 -104
WT
Strategies
Defensive tactics
aimed at reducing
internal
weaknesses &
avoiding
environmental
threats
SWOT Matrix
Strengths S
Weaknesses W
List Strengths
List Weaknesses
Opportunities O
SO Strategies
WO Strategies
List Opportunities
Overcoming weaknesses
by taking advantage of
opportunities
Threats T
ST Strategies
WT Strategies
List Threats
Ch 6 -105
Key
y External Factor
Insufficient capacity
(weakness)
Ch 6 -106
Resultant Strategy
gy
Pursue h
P
horizontal
i
t l iintegration
t
ti
by buying competitor's
facilities
Decreasing numbers of
young adults (threat)
Strong union
activity (threat)
Develop a new
employee benefits
package
SPACE Factors
Internal Strategic Position
Fi
Financial
i l Strength
St
th (FS)
Return on investment
Leverage
Liquidity
W ki capital
Working
it l
Cash flow
E i
Environmental
t l Stability
St bilit (ES)
Technological changes
Rate of inflation
Demand variability
Price range of competing products
Barriers to entry
Competitive pressure
P i elasticity
Price
l ti it off d
demand
d
Ease of exit from market
Risk involved in business
Ch 6 -107
SPACE Factors
Internal Strategic Position
Competitive Advantage CA
Market share
Product quality
Product life cycle
Customer loyalty
Competitions capacity utilization
Technological know-how
Control over suppliers & distributors
Growth p
potential
Profit potential
Financial stability
Technological know
know-how
how
Resource utilization
Ease of entry into market
Productivity, capacity utilization
Ch 6 -108
SPACE Matrix
FS
Conservative
Aggressive
+6
+5
+44
+3
+2
+1
CA
IS
-66
-55
-44
-33
-22
-11
+1
-1
+2 +3
+4
+5
+6
-2
-3
-4
Defensive
-5
Competitive
p
-6
Ch 6 -109
ES
BCG Matrix
R l ti Market
Relative
M k t Share
Sh
Position
P iti
Indus
stry Sales
s Growth
h Rate
High
1.0
Medium
.50
Low
0.0
High
+20
Stars
II
Question Marks
I
Cash Cows
III
Dogs
IV
Medium
Low
-20
Ch 6 -110
WEAK
COMPETITIVE
POSITION
1.
2.
3
3.
4.
5
5.
Ch 6 -111
Quadrant II
Market development
Market penetration
Product development
Horizontal integration
Divestiture
Liquidation
1.
2.
3.
4.
5.
6.
7.
Quadrant I
Market development
Market penetration
Product development
Forward integration
Backward integration
Horizontal integration
Concentric diversification
Quadrant III
Quadrant IV
Retrenchment
1.
Concentric diversification
Concentric diversification
2.
Horizontal diversification
Horizontal diversification
3
3.
Conglomerate
diversification
Conglomerate
diversification
4.
Joint ventures
Liquidation
SLOW MARKET GROWTH
STRONG
COMPETITIVE
POSITION
Strategy-Formulation Analytical
F
Framework
k
Stage 3:
The Decision Stage
Ch 6 -112
Quantitative Strategic
Planning Matrix
(QSPM)
Strategic Alternatives
QSPM
Key External Factors
Economy
Political/Legal/Governmental
Social/Cultural/Demographic/
Environmental
Technological
C
Competitive
Key Internal Factors
Management
Marketing
Finance/Accounting
Production/Operations
Research and Development
Computer Information
Systems
Ch 6 -113
Weight
Strategy 1
Strategy 2
Strategy 3
Corporate
Co
po ate Go
Governance
e a ce Issues
ssues
Business Weeks principles of good governance
1. No more than 2 directors current or former company executives
2. No directors do business with the company
3. Audit, compensation, and nominating committees made up
of outside directors
4. Each director attends at lest 75% of all meetings
5. Audit committee meets at least four times a year
6 CEO iis not also
6.
l the
h Chairperson
Ch i
off the
h Board
B
d
7. Shareholders have considerable power and information to
choose & replace directors
8 Stock options are considered a corporate expense
8.
9. No interlocking directorships
Ch 6 -114
STRATEGIC MANAGEMENT
Implementing Strategies:
Management & Operations Issues
Ch 7-115
Nature of Strategy
gy Implementation
Form lation vs.
Formulation
s Implementation
Formulation focuses on effectiveness
Ch 7-116
Nature of Strategy
gy Implementation
Management Perspecti
Perspectives
es
Shift in responsibility
Strategists
Ch 7-117
Division or
Functional
Managers
Management Issues
Annual Objectives
Policies
Management
Issues
Resources
Organizational structure
Restructuring
Rewards/Incentives
Ch 7-118
Management
Issues
Supportive Culture
Production/Operations
Human Resources
Ch 7-119
Management
g
Issues
Purpose of Annual Objectives -Basis for resource allocation
Mechanism for management evaluation
Metric for gauging progress on long-term
long term
objectives
Establish priorities (organizational,
(organizational division
division,
& departmental)
Ch 7-120
Management
g
Issues
4 Types of Resources
1 Financial
1.
Fi
i l resources
2. Physical resources
3. Human resources
4 Technological resources
4.
Ch 7-121
Management
g
Issues
Managing Conflict
Conflict not always
y bad
No conflict may signal apathy
Can energize opposing groups to
action
May help managers identify problems
Ch 7-122
Chandlers Strategy-Structure
gy
Relationship
New strategy
Is formulated
Organizational
performance
f
improves
Ch 7-123
New administrative
problems emerge
Organizational
performance
declines
New organizational
structure is established
Management
g
Issues
Basic Forms of Structure
Functional
F
ti
l St
Structure
t
Divisional Structure
Strategic Business Unit Structure (SBU)
Matrix Structure
Ch 7-124
Management
g
Issues
Restructuring
Downsizing
Rightsizing
Ri ht i i
Delayering
y
g
Ch 7-125
Management
g
Issues
Reengineering
Process management
Process
P
iinnovation
ti
Process redesign
g
Ch 7-126
Management
g
Issues
Production/Operations Concerns
Ch 7-128
Management
g
Issues
Production/Operations Decisions
Plant size
Inventory/Inventory control
Quality
Q lit control
t l
Cost control
Technological innovation
Ch 7-129
Management
g
Issues
Human Resource Strategic Responsibilities
Diversity Issues
Women CEOs in U.S. 2004 (examples)
Carly Fiorina
Meg Whitman
eBay
47 yrs old
Andrea Jung
Avon Products
45 yrs old
Anne Mulcahy
Xerox
50 yrs old
Marjorie Magner
Citigroup
54 yrs old
Betsy Holden
Kraft Foods
47 yrs old
Mary Sammons
Rite Aid
57 yrs old
Ch 7-131
STRATEGIC MANAGEMENT
OVERVIEW
WSIZ 2010/2011