You are on page 1of 1

The Nature of Strategic Management

Strategic Management: art/science of


formulating, implementing and evaluating
cross functional decisions that enable
organization to achieve objectives.
Stages of SM: Strategy
formulation/implementation and evaluation
Intuition, Adapting to change.
9 Key terms of SM: Competitive Advantage,
Strategist, Vision/Mission Statement, External
Opportunities and Threats, Internal Strength
and Weakness, Long term objectives,
Strategies, Annual Objectives, Policies
Strategic Management Model.
Benefits of SM
Why some firms do no SM
Business Vision /Mission
VISION: a possible & desirable picture of the
future standing. Linked to the mission or
purpose, it embraces key values and specific
goals.
MISSION: is more associated with behaviour
and the present.
Peter Ducker: What is our business = what is
our mission
Mission Statement or CREED Statement: MS is
declaration of Organizations reason of
being.
MS is essential for effectively establishing
objectives and formulating strategies
Developing VS/MS: create emotional bond
and sense of mission b/w organization and its
employees.
Characteristics of MS: 1. Declaration of
Attitude, 2. Customer Orientation
MS 9 Component: Customer,
Product/Services, Market, Technology,
Concern for Survival, Growth & Profitability,
Philosophy, Self-concept, Concern for public
Image, Concern for Employee.
The External Assessment
External SM Audit: Environmental Scanning or
Industry Analysis, focus on identifying and
evaluating trends and beyond control events.
Nature of EA: Develop list of Opportunities
and Threats.
5 Key External Forces: Economic, Social/
Cultural/Demographic & Natural environment,
Political/Legal/Governmental, Technological,
Competitive.
Process of performing EA:
Industrial Organization (I/0) view:
Competitive Intelligence Program
Market Commonality and Resource Similarity.
Competitive Analysis: Poters Five Force
Model:
1. Rivalry among competitive firms
2. Potential entry of new competitors
3. Potential development of substitute
product
4. Bargaining power of supplier
5. Bargaining power of consumer
Industry Analysis: EFE Matrix
External Factor Evaluation (EFE): allow
strategist to summarize 5 key external forces.
5 steps of EFE: (same as IFE)
Industry Analysis: CPM Matrix
Competitive Profile Matrix identifies firms
major competitors and its particular strength
and weakness. CPM 2 most imp. factors to
being successful are advertising and Global
Expansion

The Internal Assessment


Internal SM Audit: focus on identifying and
evaluating a firms strength and weaknesses in
the functional area of business
5 Key External Forces: Marketing,
Finance/Accounting, Production / Operation,
R&D, MIS)
Nature of EA: Develop list of Strengths and
Weaknesses
Objectives and strategies established: with
intentions of capitalizing upon internal
strengths and overcoming weaknesses
Distinctive Competencies.
The Resource Based View (RBV) approach to
competitive advantage: Internal Recourses are
important than External.
3 Internal Resources: Physical, Human,
Organizational
Valuable Resources: Rare, Hand to Initiate and
not easily substitutable (empirical Indicator)
Management: Planning, Organizing,
Motivating, Staffing, Controlling
Marketing:
7 basic function: Customer analysis, Selling
products/services, Products/services planning,
Pricing, Distribution, Market Research, CostBenefit Analysis
Finance & Accounting: single best measure of
firms competitive position & overall
attractiveness to investors.
F & A Function: comprises 3 Decisions:
Investment/Financing/Dividend
Basic Financial Ratios: Liquidity, Leverage,
Activity, Profitability
Production/Operation:
R & D: Internal, Contract.
MIS:
Value Chain Analysis (VCA): process to
determine cost association with organization
activities. Total revenue Total cost undertake
to develop and market a product or service
yield value.
Bench Marking.
Internal Factor Evaluating Matrix (IFE). allow
strategist to summarize 5 key internal forces.
5 steps of IFE:
1.
List key External factors
2.
Assign weight (0.0 to 1.0), industry
based
3.
Assign rating (1 to 4) to each key IF,
company based.
4.
Multiply 2 to 3 = weighted score
5.
4.

Strategy Analysis & Choice


A Comprehensive Strategy: Formulation Frame Work
Stage 1: Input Stage
EFE
CP
IFE
Stage 2: Matching Stage
SWOT
Space
BCG IE
Grand Strategy
Stage 3: Decision Stage
Quantitative Strategy Planning Matrix
SWOT Matrix: 4 Strategies SO, WO, ST, WT
Space Matrix: (Strategic Position and Actual Evaluation);
2 Internal Dimensions
(Financial (FP) & Competitive (CP) positions) &
2 External Dimensions
(Stability (SP) & Industrial (IP) positions)

Quadrant Frame Work; Aggressive, Consecutive,


Defensive, Competitive Strategies
BCG Matrix; Boston Consulting Group Matrix; Quadrant
Q1 (Question Mark), Q2 (Stars), Q3 (Cash Cows0< Q4
(Dogs)

IE Matrix; the Internal-External Matrix


Grow & Build (I, II, IV) Integration & Intensive Strategy
Hold & Maintain (III, V, VII) Market Penetration &
Product Development
Harvest & Divest (VI, VIII, IX) Retrenchment & Divestiture

The Grand Strategy Matrix:


2 Evaluative Dimensions (Competitive Position and
Market Growth) and 4 Quadrants

Decision Stage (QSPM) indicate which alternate strategy


is best, uses inputs of stage 1, matches with stage 2 and
analyses to decide objectively
Strategies in Action: 16 types of strategies
Long Term Objective:
Nature of LTO:

Should be quantitative, measureable, realistic, understandable, challenging, obtainable, and hierarchical.

Needed at corporate, divisional and functional levels.


Financial Objectives, Strategic Objectives.
Not Managing by Objectives:
Avoid Managing by Exploration/Crisis/Subjective/Hope
Types of Strategies:

Integration: Forward/Backward/Horizontal

Intensive: Market Penetration, Market/Product Development

Diversification: Related/Unrelated diversifications

Defensive: Retrenchment, Divestiture, Liquidation.


Level of Strategies:

Large Firm: Corporate, Divisional, Functional, Operational

Small Firm: Company, Functional, Operational


Michael Porter 5 Generic Strategies: Cost Leadership (low cost and best value), Differentiation, Focus (low
cost and best value).
Means of Achieving Strategies: Cooperation among Competitors, joint Ventures, Merger/Acquisition

You might also like