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STRATEGIC MANAGEMENT

ADDITIONAL MATERIALS

Prof nadzw. dr inz. Waldemar Karwowski


wkwsiz@gmail.com

WSIZ 2010/2011

Learning Objectives:
By the end of this course, students will have the ability to

1) understand the purposes


purposes, processes
processes, and tools of strategic
management
2) apply the critical thinking skills required to analyze complex
b i
business
situations,
it ti
3) grasp the challenges facing todays organizations as they
grow, restructure and compete in an increasingly global
context and within newly emerging markets
4) examine the multifaceted role of business organizations in
the contemporary world,
world including considerations of social
responsibility and ethics

STRATEGIC MANAGEMENT
The Nature of Strategic Management

Strategic
g Management
g
Defined

Art & science of formulating,


g
implementing, and evaluating,
cross-functional
cross
functional decisions that
enable an organization to achieve
its objectives.
objectives

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

2. Effectively formulating, implementing &


evaluating strategies

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

Opportunities & Threats (External)


Analysis of Trends:

Economic

Social

Cultural

Demographic/Environmental

Political, Legal, Governmental

Technological

Competitors

Key
y Terms

Strengths & Weaknesses (Internal)


Typically located in functional areas of the firm

M
Management
t

Marketing

Finance/Accounting

Production/Operations

Research & Development

Computer Information Systems

Key
y Terms

Strategies
Means by which long-term objectives are
achieved

Comprehensive strategic management


model
External
Audit

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

Business Ethics & Strategic


g
Management

Code of business ethics


Provides
P
id b
basis
i on which
hi h policies
li i can b
be
devised to guide daily behavior and
decisions in the workplace
p

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

Vision & Mission

Shared Vision - Creates commonality of interests


Reduce daily monotony
Provides opportunity & challenge

Vision Statement Examples

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!

-- Atlanta Web Printers, Inc.

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

Vision & Mission

Profit & vision are necessary to effectively


motivate a workforce

Mission Statement Example

The Bellevue Hospital, with respect,


compassion integrity
compassion,
integrity, and courage
courage, honors
the individuality and confidentiality of our
patients, employees, and community, and is
progressive in anticipating and providing
future health care services.
-- The Bellevue Hospital

Importance of Mission
Benefits from a strong mission

Unanimity of Purpose

Resource Allocation

Mission
Organizational Climate
Focal point for work
structure

Mission & Customer


Orientation Vern McGinnis
Define what the organization is
Define what it aspires to be
Limited to exclude some ventures
Broad enough to allow for growth
Distinguishes firm from all others
Stated clearly understood by all

Social Policy
y & Mission

Social policy should be integrated in all


strategic-management
g
g
activities.
Mission
Mi
i should
h ld convey th
the social
i l
responsibility of the firm

Vision & Mission


Research results are mixed
mixed, however
however,
firms with formal mission statements --

2x average return on shareholders equity


Positive relationship to company
performance
f
30% high return on certain financial measures

Customers

Products
Services

Markets

Technology
Employees

Mission
Mi
i
Elements
Survival
Growth
Profit

Public
Image
Self-Concept

Philosophy

Ben & Jerrys


y Mission
Ben & Jerrys mission is to make, distribute and sell
the finest q
quality
y all-natural ice cream and related
products in a wide variety of innovative flavors
made from Vermont dairy products. To operate
the Company on a sound financial basis of
profitable growth, increasing value for our
shareholders,, and creating
g career opportunities
pp
and financial rewards for our employees. To
operate the Company in a way that actively
recognizes the central role that business plays in
the structure of society by initiating innovative
ways to improve the quality of life of a broad
communitylocal, national and international.

Mission Statement Evaluation Matrix


COMPONENTS

Customers

Products
Services

Markets

Concern for
Survival,
Growth,
Profitability

PepsiCo

Yes

No

No

Yes

No

Ben & Jerry's

No

Yes

Yes

Yes

No

Organization

Technology

Mission Statement Evaluation Matrix


COMPONENTS

Philosophy

SelfConcept

Concern for
Public Image

Concern for
Employees

PepsiCo

Yes

No

No

No

Ben & Jerry's

No

Yes

Yes

Yes

Organization

STRATEGIC MANAGEMENT
The External Assessment

External Strategic
g
Management Audit

Identify & Evaluate factors beyond


the control of a single firm
Increased foreign competition
Population shifts
Information technology

Key External Forces & the Organization

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

I/O Perspective Firm Performance

Industry Properties
Economies of Scale
Barriers to market entry
Product differentiation
Level of competitiveness

Social, Cultural, Demographic


g
& Environmental Forces
U.S. Facts

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

Key Social, Cultural, Demographic &


Environmental Variables

Childbearing rates
Number of special interest groups
Number of marriages & divorces
Number of births & deaths
Immigration & emigration rates

Political, Government & Legal


g
Forces
Globalization of Industry
Worldwide trend toward similar
consumption patterns
Global buyers and sellers
E-commerce
Technology for instant currency transfers

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

The Five-Forces Model of Competition


Potential development
of substitute products

Bargaining power
of suppliers

Rivalry among
competing firms

Potential entry of new


competitors

Bargaining power
of consumers

The Global Challenge


g

Faced by U.S. Firms --

Ga
Gain & maintain
a ta e
exports
po ts to ot
other
e
nations
Defend domestic markets against
imported goods

Industry Analysis: The External Factor


Evaluation (EFE) Matrix
S
Summarize
i & Evaluate
E l t
Economic

Demographic

Governmental

Social

Environmental

Technological

Cultural

Political

Competitive

EFE Gateway Computers (2003)


Weight

Rating

Wtd
Score

1. Global PC market expected to grow


1
20% in 2004

0.10

0.30

2. Cost of PC component parts


expected
t d to
t decrease
d
10% - 2004

0.10
0
0

0.30
0
30

3. Internet use growing rapidly

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

Key External Factors

Opportunities

EFE Gateway Computers (2003) (contd)


(cont d)
Weight

Rating

Wtd
Score

6. Modernization of business firms and


6
government agencies

0.05

0.10

7. U.S. (& world) economies recovering

0.05

0.15

8. 30% of Chinese population can


afford a PC; only 10% of homes have a
PC

0.05

0.05

Threats

0.10

0.10

1. Intense rivalry in industry

0.10

0.05

Key External Factors

Opportunities (contd)

EFE Gateway Computers (2003) (contd)


(cont d)
Weight

Rating

Wtd
Score

2 Severe price cutting in PC industry


2.

0 10
0.10

0 20
0.20

3. Different countries have different


regs
g and infrastructure for PCs

0.05

0.05

4. Palm & PDA becoming substitutes

0.05

0.15

5. Demand exceeds supply of


experienced PC workers

0 05
0.05

0 20
0.20

6. Birth rate in U.S. declining annually

0.05

0.15

Key External Factors

Threats (contd)

EFE Gateway Computers (2003) (contd)


Weight

Rating

Wtd
Score

7. U.s. consumers and businesses


delaying purchase of PCs
PC s

0.05

0.10

8. PC firms diversifying into consumer


electronics

0.05

0.15

Total

1.00

Key External Factors

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

Total weighted score of 1.0


Firms strategies not capitalizing on opportunities
or avoiding threats

Industry Analysis: Competitive Profile


Matrix (CPM)

Identifies firms major


j competitors
p
and their strengths & weaknesses
in relation to a sample firms
firm s
strategic positions

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

Prod. Capacity 0.04

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

Customer Serv 0.10

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

Nature of an Internal Audit


Basis for Objectives & Strategies

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

Resource Based View (RBV)


(
)
Approach
pp
to Competitive
p
Advantage
g

Internal resources are more important


than external factors

Resource Based View (RBV)


(
)
3 All Encompassing
p
g Categories
g

1. Physical resources
2. Human resources
3. Organizational resources

Resource Based View (RBV)


(
)
Empirical
p
Indicators

Rare
Hard to imitate
Not easily substitutable

Integrating
g
g Strategy
gy & Culture
Organizational Culture

Pattern of behavior developed by an


organization as it learns to cope with its
problem of external adaptation and
internal integrationis considered valid
and taught to new members

Integrating Strategy & Culture


Values
Beliefs

Legends
g

Heroes

Symbols

Cultural
Products

Myths

Rites

Rituals

Management
Function

Stage When Most


Important

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

1 Investment decision (Capital budgeting)


1.
2. Financing decision
3. Dividend decision

Production/Operations
Production/Operations Functions
Process
Capacity
Inventory
y
Workforce
Quality

Research & Development


Research & Development Functions
Development of new products before
competitors
tit
Improving product quality
Improving manufacturing processes to
reduce costs

Management
g
Information
Systems

Information Systems
CIO/CTO
Security
User friendly
User-friendly
E-commerce

IFE Gateway Computers (2003)


Weight

Rating

Wtd
Score

1. Several new senior executive with worldclass


l
skills
kill and
d lleadership
d hi experience
i

0.05

0.40

2. Continuous decline in operating costs


and cost of goods sold

0.05

0.15

3. Well-known brand name

0.05

0.15

4. Consumer Reports (Sept 2002)


recommended Gateway 500X as #1

0 10
0.10

0 40
0.40

5. As a direct seller, Gateway holds high


brand recognition

0.05

0.15

Key Internal Factors

Strengths

IFE Gateway Computers (2003)


Weight

Rating

Wtd
Score

6. Gateway is diversifying into non-PC


products
d t

0.10

0.30

7. Good relationship with its suppliers.

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

Key Internal Factors

Strengths (contd)

IFE Gateway Computers (2003)


Weight

Rating

Wtd
Score

1. High operating expense (22% of revenue


vs. 10% for
f Dell)
D ll)

0.05

0.15

2. Almost no budget for R&D vs. Dells 18%


of revenue

0.10

0.05

3. Low return on assets ratio

0.025

0.10

4. No niche market

0.025

0.05

Key Internal Factors

Weaknesses

IFE Gateway Computers (2003)


Weight

Rating

Wtd
Score

5. Shortage of cash due to successive


l
losses

0.10

0.20

6. Limited number Gateway stores

0.05

0.10

7. Weak performance in overseas market

0.10

0.20

TOTAL

1.00

Key Internal Factors

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

75% on long-term objectives


25% on annual objectives
50% on long-term objectives
50% on annual objectives
25% on long-term objectives
75% on annual objectives

Financial vs. Strategic


g
Objectives
Financial Objectives
Growth in revenues
Growth in earnings
Higher dividends
Higher profit margins
Higher Earnings per share
Improved cash flow

Types
y
of Strategies
g
A Large Company

Corp
Level

Division Level

F
Functional
i
l Level
L
l

Operational Level

The Balanced Scorecard


Robert Kaplan & David Norton -Strategy evaluation & control technique
Balance financial measures with non-financial
measures
Balance shareholder objectives with customer
& operational
ti
l objectives
bj ti

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

Doll maker & mail order firm,


Pleasant Co
Co., opened a retail
store in Manhattan

Backward
Integration

McDonalds recently acquired a


paper cup producer

Horizontal
Integration

Callaway
y Golf recently
y acquired
q
Top-Flite Golf Company

2003 Examples
Market
Penetration

SABMiller Plc spent $500


million in 2003 on marketing its
Miller brands of beer

Market
Development

JetBlue is adding dozens of


new routes

Product
Development

GM developing hydrogen
powered automobiles or Pfizer
developing a new antismoking
pill

2003 Examples
Concentric
Diversification

Microsoft launched its first


personal computers that double
as entertainment centers

Conglomerate
Diversification

The video-rental firm


Blockbuster may acquire the
DVD and music directmarketing firm Columbia House

Horizontal
Diversification

Viacom acquired Comedy


Central, from AOL

2003 Examples
Retrenchment

Divestiture

Liquidation

America West Airlines closing


its hub at Columbus,
Columbus Ohio and
laying off 390 employees
ConocoPhillips recently sold its
Circle K convenience store
chain to Alimentation CoucheTard, a Canadian firm
Sprint liquidated its WebWeb
hosting division

Michael Porters Generic Strategies


g

Cost Leadership Strategies

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

First Mover Advantages

Benefits a firm mayy achieve by


y entering
ga
new market or developing a new product
or service p
prior to rival firms.

Outsourcing
Business-process outsourcing
(BPO)

Companies taking over the functional


operations
p
of other firms

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

External Factor Evaluation


Matrix (EFE)

Competitive Profile Matrix


(CPM)

Ch 6 -98

Strategy-Formulation Analytical
F
Framework
k

SWOT Matrix

SPACE Matrix

Stage 2:
The Matching Stage

BCG Matrix

IE Matrix

Grand Strategy 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

Use strengths to take


advantage of
opportunities

Overcoming weaknesses
by taking advantage of
opportunities

Threats T

ST Strategies

WT Strategies

List Threats

Use strengths to avoid


threats

Minimize weaknesses and


avoid threats

Ch 6 -105

Matching Key Factors to Formulate Alternative Strategies


Key
y Internal Factor

Key
y External Factor

Excess working capacity


(strength)

20% annual growth in


the cell phone industry
(opportunity)

Insufficient capacity
(weakness)

Strong R&D (strength)

Poor employee morale


(weakness)

Ch 6 -106

Resultant Strategy
gy

Acquire Cellfone, Inc.

Exitit off two


E
t
major
j foreign
f i
+ competitors form the
=
industry (opportunity)

Pursue h
P
horizontal
i
t l iintegration
t
ti
by buying competitor's
facilities

Decreasing numbers of
young adults (threat)

Develop new products for


older adults

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

External Strategic Position

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

External Strategic Position

Competitive Advantage CA

Industry Strength (IS)

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

RAPID MARKET GROWTH


1.
2.
3.
4.
5.
6.

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

Implementation focuses on efficiency

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 (cont


(contd)
d)
Resistance to Change
Natural Environment

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

Tests for Performance-Pay Plans


Does the plan capture attention?

Do employees understand the plan?

Is the plan improving communication?

Does the plan pay out when it should?

Is the company or unit performing better?


Ch 7-127

Management
g
Issues
Production/Operations Concerns

-- Production processes typically


constitute more than 70% of firms total
assets

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

Assessing staffing needs/costs


Developing performance incentives
ESOPs
ESOP
Child
Child-care
care policies
Work-life balance issues
Ch 7-130

Diversity Issues
Women CEOs in U.S. 2004 (examples)
Carly Fiorina

Hewlett-Packard 49 yrs old

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

Prof nadzw. dr inz. Waldemar Karwowski


wkwsiz@gmail.com

WSIZ 2010/2011

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