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Instructor: Ker Channarin 011696835

Course name: Strategic Management Textbook: Strategic Management, 12th Edition, by David (Prentice Hall, copyright 2009) Other: Strategic management and business policy, 9th Edition, by Thomas L.Wheelen (Prentice Hall copyright 2004)

Course Description Strategic Management is the capstone, integrative course for graduating business administration students. This is an exciting, challenging course that focuses on how firms formulate, implement, and evaluate strategies. Strategic-management concepts and techniques are studied. Students use all the knowledge acquired from prior business courses, coupled with new strategicmanagement techniques learned, to chart the future direction of different organizations. The major responsibility of students in this course is to make objective strategic decisions and to justify them through oral and written communication
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Grading system: Grading System: -If the studentd that can not attend the class more than 10 times, they will not be allowed to take graduate examination. - Graduate Examination 100%

Course Outline
Chapter1: The nature of Strategic Management Chapter2: The Business Mission and Vision Chapter3:External Assessment Chapter4: Internal Assessment Chapter5: Strategic action Chapter6: Strategy Analysis and choice Chapter7: Implementing strategies: management and

operations issues Chapter8: Implementing strategies: marketing, finance/Accounting, R&D and MIS issues Chapter 9: Strategy review evaluation and control
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Chapter 1 The Nature of Strategic Management

Strategic Management: Concepts & Cases 12th Edition Fred David

Instructor : Ker Channarin

Ch 1 -1

Strategic Management Defined


Art & science of formulating, implementing, and evaluating, crossfunctional decisions that enable an organization to achieve its objectives.

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Ch 1 -2

Strategic Management

In essence, the strategic plan is a companys game plan.

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Ch 1 -3

Strategic Management achieves a firms success through integration --

Marketing Management Finance/Acc Pro-/Operations R&D MIS

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Ch 1 -4

Strategy Formulation Vision & Mission External O& T

Internal S& W
Long-Term Objectives Alternative Strategies Strategy Selection

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Ch 1 -5

Issues in Strategy Formulation New Business opportunities Businesses to abandon Allocation of resources Expansion or diversification International markets Mergers or joint ventures Avoidance of hostile takeover
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Strategy Implementation

Annual Objectives Policies Employee Motivation Resource Allocation

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Ch 1 -7

Strategy Implementation Action Stage of Strategic Management Most difficult stage Mobilization of employees & managers Interpersonal skills critical Consensus on goal pursuit
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Strategy Evaluation

Internal Review External Review Performance Metrics Corrective Actions

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Ch 1 -9

Strategy Evaluation
Final Stage of Strategic Management Subject to future modification Todays success no guarantee of future success New & different problems Complacency leads to demise

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Ch 1 -10

Prime Task of Strategic Management

Peter Drucker: -- think through the overall mission of a business. Ask the key question: What is our Business?

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Ch 1 -11

Achieving Sustained Competitive Advantage

1. Adapting to change in external

trends, internal capabilities and resources 2. Effectively formulating, implementing & evaluating strategies
Instructor : Ker Channarin Ch 1 -12

Adapting to Change Rate & magnitude of change increasing dramatically E-commerce Demographics Technology
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Adapting to Change Key Strategic Management Questions

What kind of business should we become? Are we in the right fields Are there new competitors What strategies should we pursue? How are our customers changing?
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Key Terms
Strategists Firms success/failure
Various Job Titles: Chief Executive Officer (CEO) Chief Strategy Officer (CSO) President Owner Board Chair Executive Director
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Key Terms Vision Statement What do we want to become? Mission Statement What is our business?

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Ch 1 -16

Key Terms Opportunities & Threats (External): Largely beyond the control of a single organization
Analysis of Trends: Economic Social Cultural Demographic/Environmental Political, Legal, Governmental Technological Competitors
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Key Terms Strengths & Weaknesses (Internal)


Typically located in functional areas of the firm Management Marketing Finance/Accounting Production/Operations Research & Development Computer Information Systems
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Key Terms Strengths & Weaknesses Assessing the Internal Environment


Financial Ratios

Performance Metrics

Internal Factors
Industry Averages

Survey Data

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Ch 1 -19

Long-term Objectives

Mission-driven pursuit of specified results more than one year out Essential for ensuring the firms success Provide direction Create synergy Focus coordination Basis for planning, motivating, and controlling
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Strategies : Means by which long-term objectives are achieved Some Examples Geographic expansion Diversification Acquisition Market penetration Retrenchment Liquidation Joint venture
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Annual Objective Short-term milestones that firms must achieve to attain long-term objectives Policies Means by which annual objectives will be achieved

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Ch 1 -22

Comprehensive strategic management model


External Audit

Chapter 3

Vision & Mission

Long-Term Objectives

Generate, Evaluate, Select Strategies

Implement Strategies: Mgmt Issues

Implement Strategies: Marketing, Fin/Acct, R&D, CIS

Measure & Evaluate Performance

Chapter 2

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9

Internal Audit

Chapter 4

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Ch 1 -23

Benefits of Strategic Management


Financial Benefits Improvement in sales Improvement in profitability Productivity improvement

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Ch 1 -24

Benefits of Strategic Management


Non-Financial Benefits

Improved understanding of competitors strategies Enhanced awareness of threats Reduced resistance to change Enhanced problem-prevention capabilities
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Benefits of Strategic Management (Greenley) 1. Identification of Opportunities


2. Objective view of management problems 3. Improved coordination & control 4. Minimizes adverse conditions & changes 5. Decisions that better support objectives
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Benefits of Strategic Management (Greenley contd) 6. Effective allocation of time & resources 7. Internal communication among personnel 8. Integration of individual behaviors 9. Clarify individual responsibilities 10. Encourage forward thinking
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Benefits of Strategic Management (Greenley contd )


11.Encourages

favorable attitude toward change discipline and formality to the management of the business

12.Provides

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Ch 1 -28

Business Ethics & Strategic Management

Business Ethics defined as principles of conduct within organizations that guide decision making and behavior. Good business ethics are prerequisite for good strategic management
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Business Ethics & Strategic Management


Business practices always considered unethical

Misleading advertising Misleading labeling Harm to the environment Insider trading Dumping flawed products on foreign markets Poor product or service safety Padding expense accounts
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Chapter 2 The Business Vision & Mission

Strategic Management: Concepts & Cases 12th Edition Fred David

Instructor : Ker Channarin

Ch 2 -1

Vision Agreement on the basic vision for which the firm strives to achieve in the long run is critically important to the firms success. A Vision Statement focuses on the future, it provides a picture of where the organization is going, or what it will look like in the next 5 to 10 years.

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Ch 2 -2

Vision

What do we want to become?

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Ch 2 -3

Vision

Clear Business Vision Comprehensive Mission Statement

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Ch 2 -4

Step 1: The facilitator distributes the Worksheets to be completed by senior managers. Step 2: Each manager completes the worksheets. Step 3: Group brainstorming exercise Consensus on final statements of Vision.
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Writing the Vision Statements

Vision Determination Worksheet


1. What will your primary products and services be in 5 years? ____________________________ ______________________________________ ______________________________________ 2. Who will your primary customers be in 5 years? ______________________________________ ______________________________________ 3. Where will your primary customers be located in 5 years? _______________________________ _______________________________________

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Ch 2 -6

4. What will the size of your company be in 5 years? (e.g. Sales / # of Employees) ______________________ _______________________________________ 5. What will your competitive position be in 5 years? (e.g. pioneer, leader, etc.) ___________________ _______________________________________ 6. Summary: Use the above information to write a brief Vision Statement:______________________ _______________________________________

Vision Determination Worksheet

Instructor : Ker Channarin

Ch 2 -7

Vision & Mission

Shared Vision -Creates commonality of interests Reduce daily monotony Provides opportunity & challenge
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Vision Statements (Examples)


General Motors: Our vision is for GM to be the world leader in transportation products and related services Dell Computer Corp.: To become the world leader in computer sales for home, office, and university use. PepsiCos responsibility is to continually improve all aspects of the world in which we operate environment, social, economic creating a better tomorrow than today.

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Ch 2 -9

Mission Statements

What is our business?

Instructor : Ker Channarin

Ch 2 -10

Mission Statements

Enduring statement of purpose


Distinguishes one firm from another Declares the firms reason for being

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Ch 2 -11

Mission Statements
Also referred to as:

Creed statement Statement of purpose Statement of philosophy Statement of business principles


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Mission Preparation Worksheet


1)

What does your company do? _____________ ______________________________________ 2) For whom? (resulting benefits for customers/society) ______________________________________ ______________________________________ 3) What are the core values which comprise the foundation for the above activities? (Optional) _____________________________________ 4) Summary: Draft Mission Statement ________

__________________________________ ___

Instructor : Ker Channarin

Ch 2 -13

Mission Statements Reveal what an organization wants to be and whom it wants to serve

Essential for effectively establishing objectives and formulating strategies

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Ch 2 -14

Developing Vision & Mission

Clear mission is needed before alternative strategies can be formulated and implemented Participation from diverse managers is important in developing the mission.

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Ch 2 -15

Importance of Mission
Benefits from a strong mission

Unanimity of Purpose Resource Allocation

Mission
Organizational Climate Focal point for work structure
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Effective Missions

Broad in scope Generate strategic alternatives Not overly specific Reconciles interests among diverse stakeholders Finely balanced between specificity & generality

Instructor : Ker Channarin

Ch 2 -17

Effective Missions

Arouse positive feelings & emotions Motivate readers to action Generate favorable impression of the firm

Instructor : Ker Channarin

Ch 2 -18

Effective Missions

Reflect future growth Provide criteria for strategy selection Basis for generating & evaluating strategic options Are dynamic in nature

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Ch 2 -19

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

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Ch 2 -20

Customers

Products Services

Markets

Technology Employees

Mission Elements
Survival Growth Profit
Self-Concept

Public Image

Philosophy

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Ch 2 -21

Mission Statement Examples


Dells mission is to be the most successful computer company in the world at delivering the best customer experience in markets we serve. In doing so, Dell will meet consumer expectations of highest quality; leading technology; competitive pricing; individual and company accountability; best-in-class service and support; flexible customization capability; superior corporate citizenship; financial stability.

Instructor : Ker Channarin

Ch 2 -22

Mission Statement Examples Proctor & Gamble will provide branded products and services of superior quality and value that improve the lives of the worlds consumers. As a result, consumers will reward us with industry leadership in sales, profit, and value creation, allowing our people, our shareholders, and the communities in which we live and work to prosper.

Instructor : Ker Channarin

Ch 2 -23

Mission Statement Examples

At LOreal, we believe that lasting business success is built upon ethical standards which guide growth and on a genuine sense of responsibility to our employees, our consumers, our environment and to the communities in which we operate.

Instructor : Ker Channarin

Ch 2 -24

Mission Statement Evaluation Matrix

COMPONENT

COMPONENT

COMPONENT

COMPONENT

COMPONENT

Organization

Customers

Products or Services

Markets

Concern for Survival, Growth, Profitability

Technology

Dell Proctor & Gamble LOreal

Yes

Yes

Yes

Yes

Yes

Yes

No

Yes No

No No

Yes
Ch 2 -25

Instructor : Ker Channarin No No

No

Mission Statement Evaluation Matrix

COMPONENT

COMPONENT

COMPONENT

COMPONENT

Organization Dell Proctor & Gamble LOreal

Philosophy Yes No No

SelfConcept Yes Yes Yes

Concern for Public Image Yes Yes Yes

Concern for Employees No Yes Yes

Instructor : Ker Channarin

Ch 2 -26

Chapter 3 The External Assessment

Strategic Management: Concepts & Cases 12th Edition Fred David

Instructor : Ker Channarin

Ch 3 -1

External Strategic Management Audit

Environmental Scanning Industry Analysis

Instructor : Ker Channarin

Ch 3 -2

External Strategic Management Audit

Identify & evaluate factors beyond the control of a single firm Increased foreign competition Population shifts Aging society Fear of traveling Stock market volatility

Instructor : Ker Channarin

Ch 3 -3

External Strategic Management Audit

Purpose of External Audit


Identify

Opportunities Threats

Instructor : Ker Channarin

Ch 3 -4

Instructor : Ker Channarin

Ch 3 -5

External Audit
Gather competitive intelligence

Social Cultural Demographic Environmental Governmental Legal Technological

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Ch 3 -6

External Audit Sources of Information


Internet Libraries Suppliers Distributors Salespersons Customers Competition
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Performing External Audit Variables

Market share Breadth of competing products World economies Foreign affiliates Proprietary account advantages
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Performing External Audit Variables

Price competitiveness Technological advancements Interest rates Pollution abatement

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Ch 3 -9

Performing External Audit

Long-term Orientation

External Factors

Measurable
Applicable to Competing Firms Hierarchical

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Ch 3 -10

Industrial Organization (I/O) View

Industry factors more important than internal factors

Performance determined by industry forces

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Ch 3 -11

I/O Perspective Firm Performance

Industry Properties
Economies of Scale Barriers to Market Entry Product Differentiation Level of Competitiveness

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Ch 3 -12

Economic Forces Availability of credit Level of disposable income Interest rtes Inflation rates Trends in the dollars value Economic standard of living Consumption patterns
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Social, Cultural, Demographic, and Environmental Forces

Major Impact

Products Services Markets Customers


Instructor : Ker Channarin Ch 3 -14

Social, Cultural, Demographic, and Environmental Forces


Facts

World population approaching 7 billion World population = 8 billion by 2028 World population = 9 billion by 2054 U.S. population < 300 million

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Ch 3 -15

Social, Cultural, Demographic, and Environmental Forces


Trends
More American households with people

living alone Aging Americans affects all organizations Population shift to the south and west Decimation and degradation of the natural environment
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Ch 3 -16

Social, Cultural, Demographic, and Environmental Forces


21st Century Trends

More educated consumers Aging population Minorities more influential Local rather than federal solutions

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Ch 3 -17

Social, Cultural, Demographic, and Environmental Forces (contd)


21st Century Trends

Fixation with youth decreasing Hispanics increase to 15% by 2021 African-American increase to 14% by 2021
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Key Social, Cultural, Demographic, and Environmental Variables

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

Instructor : Ker Channarin

Ch 3 -19

Political, Governmental, and Legal Forces Government Regulation Key opportunities & threats Antitrust legislation Tax rates Lobbying efforts Patent laws
Instructor : Ker Channarin Ch 3 -20

Political, Governmental, and Legal Forces Globalization of Industry

Worldwide trend toward similar consumption patterns Global buyers and sellers E-commerce Technology for instant currency transfers

Instructor : Ker Channarin

Ch 3 -21

Technological Forces

Major Impact

Internet Communications Semiconductors

Instructor : Ker Channarin

Ch 3 -22

Technological Forces

Significance of IT

Chief Information Officer (CIO) Chief Technology Officer (CTO)

Instructor : Ker Channarin

Ch 3 -23

Competitive Forces

Collection & evaluation of data on competitors is essential for successful strategy formulation Competition on virtually all industries can be described as intense

Instructor : Ker Channarin

Ch 3 -24

Competitive Forces
Identifying Rival Firms

Strengths Weaknesses Capabilities Opportunities Threats Objectives Strategies


Instructor : Ker Channarin Ch 3 -25

The Five-Forces Model of Competition

Instructor : Ker Channarin

Ch 3 -26

Steps to Determine if an Acceptable Profit Can Be Earned


Identify key aspects or elements of each competitive force 2. Evaluate how strong and important each element is for the firm 3. Decide whether the collective strength of the elements is worth the firm entering or staying in the industry
1.

Instructor : Ker Channarin

Ch 3 -27

The Five-Forces Model

Rivalry Among Competing Firms Most powerful of the five forces Focus on competitive advantage of strategies

Instructor : Ker Channarin

Ch 3 -28

The Five-Forces Model

Potential Entry of New Competitors Barriers to entry are important Quality, pricing, and marketing can overcome barriers

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Ch 3 -29

The Five-Forces Model

Potential Development of Substitute Products Pressures increase when consumers switching costs decrease Firms plans for increased capacity & market penetration

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Ch 3 -30

The Five-Forces Model

Bargaining Power of Suppliers Large number of suppliers & few substitutes affects intensity of competition Backward integration can gain control or ownership of suppliers

Instructor : Ker Channarin

Ch 3 -31

The Five-Forces Model

Bargaining Power of Consumers Customers concentrated or buying in volume affects intensity of competition Consumer power is higher where products are standard or undifferentiated

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Ch 3 -32

The Global Challenge Faced by U.S. Firms

Gain & maintain exports to other nations Defend domestic markets against imported goods

Instructor : Ker Channarin

Ch 3 -33

The Global Challenge Globalization of Industries

Similar consumption patterns Global buyers and sellers E-commerce Instant transmission of money & information
Instructor : Ker Channarin Ch 3 -34

Industry Analysis: The External Factor Evaluation (EFE) Matrix Summarize & Evaluate
Economic Social Cultural Demographic
Governmental

Environmental Technological Political Competitive

Instructor : Ker Channarin

Ch 3 -35

There are five steps in developing an EFE Matrix

List key external factors as identified

in the external-audit process. Include a total of 10-20 factors from both the Opp and threats. Assign to each factor a weight from .0 (not important) to 1.0 (very important). These weights show the relative importance. The total of all the weights should equal 1.0. .
Instructor : Ker Channarin Ch 3 -36

Assign a 1-4 rating to each factor to

indicate how effectively the firms current response strategy is: 1 = the response is poor, 2 = the response is average, 3 = the response is above average, and 4 = the response is superior.
Instructor : Ker Channarin Ch 3 -37

Multiply each factors weight by its

There are five steps in developing an EFE Matrix (contd)

rating to get a weighted score. Sum the weighted scores for each variable to determine the total weighted score for the organization.

Instructor : Ker Channarin

Ch 3 -38

A sample external factor evaluation matrix for Retail Computer Store

External Factor
Opportunities 1. population of city growing 10% 2. Rival computer store opening 1 kilometer away 3. Vehicle traffic passing store up 12% 4. Vendors average six new product per year 5. Senior citizen use of computers up 8% 6. Small business growth in area up 10% 7. desire for web sites up 18% by Realtors 8.Desire for web site up 12% by small firms
Instructor : Ker Channarin

Weight

Rating

Weighted Score

0.10 0.10 0.08 0.05 0.05 0.10 0.06 0.06

3 2 3 2 2 3 3 2

0.30 0.20 0.24 0.10 0.10 0.30 0.18 0.12


Ch 3 -39

A sample external factor evaluation matrix for Retail Computer Store

External Factor
Threat
1. Best buy opening new store in 1 years nearby 2. Local university offers computer repair

Weight

Rating

Weighted Score

0.10 0.08

1 2 4 2 1 2

0.10 0.16 0.40 0.10 0.04 0.06 2.40

3. New bypass Hwy 34 in 1 year will divert traffic 4. New mall being build nearby 5. Gas price up 14% 6. Vendors raising price 8%

0.10 0.05 0.04 0.03

Total

1.00

Instructor : Ker Channarin

Ch 3 -40

Industry Analysis EFE


Total weighted score of 4.0

Organization response is outstanding to threats and weaknesses

Total weighted score of 1.0

Firms strategies not capitalizing on opportunities or avoiding threats

Instructor : Ker Channarin

Ch 3 -41

Industry Analysis: Competitive Profile Matrix (CPM)

Identifies firms major competitors and their strengths & weaknesses in relation to a sample firms strategic positions
Instructor : Ker Channarin Ch 3 -42

Company1 CSFs Wt
Rating Wtd Score

Company2
Ratin g Wtd Score

Company 3
Rating Wtd Score

Advertising Product quality


Price competitiveness

0.20 0.10 0.10

1 4 3

0.20 0.40 0.30

4 3 2

0.80 0.30 0.20

3 2 4

0.60 0.20 0.40

Management Financial Position

0.10 0.15

4 4

0.40 0.60

3 2

0.30 0.30

3 3

0.30 0.45
Ch 3 -43

Instructor : Ker Channarin

Company1 CSFs (contd) Wt Ratin Wtd g Scor e 4 4 0.40 0.80

Company2

Company3

Rati Wtd Ratin Wtd ng Score g Score

Customer loyalty Global Exp.

0.10 0.20

3 1

0.30 0.20

2 2

0.20 0.40

Market Share Total

0.05 1.00

0.05 3.15

0.20 2.60

0.15 2.70

Instructor : Ker Channarin

Ch 3 -44

Chapter 4 The Internal Assessment

Strategic Management: Concepts & Cases 12th Edition Fred David

Instructor: Ker Channarin

Ch 4-1

Nature of an Internal Audit

Functional Areas of Business Strengths Weaknesses

Instructor: Ker Channarin

Ch 4-2

Nature of an Internal Audit


Basis for Objectives & Strategies
Internal strengths/weaknesses External opportunities/threats Clear statement of mission

Instructor: Ker Channarin

Ch 4-3

Internal Audit
Parallels process of external audit

Information from:
Management Marketing Finance/accounting Production/operations Research & development Management information systems
Instructor: Ker Channarin Ch 4-4

Internal Audit

Involvement in performing an internal strategic-management audit provides vehicle for understanding nature and effect of decisions in other functional business areas of the firm

Instructor: Ker Channarin

Ch 4-5

Internal Audit
Key to Organizational Success

Coordination & understanding among managers from all functional areas

Instructor: Ker Channarin

Ch 4-6

Resource Based View (RBV)


Three All-Encompassing Categories

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

Instructor: Ker Channarin

Ch 4-7

Resource Based View (RBV)


Empirical Indicators

Rare Hard to imitate Not easily substitutable

Instructor: Ker Channarin

Ch 4-8

Integrating Strategy & Culture


Organizational Culture

Pattern of behavior developed by an organization as it learns to cope with its problem of external adaptation and internal integration . . . is considered valid and taught to new members

Instructor: Ker Channarin

Ch 4-9

Integrating Strategy & Culture


Organizational Culture

Resistant to change May represent: Strength Weakness

Instructor: Ker Channarin

Ch 4-10

Integrating Strategy & Culture


Values Legends Beliefs

Heroes

Cultural Products

Rites

Symbols

Myths

Rituals

Instructor: Ker Channarin

Ch 4-11

Management
Functions of Management

1. Planning 2. Organizing 3. Motivating 4. Staffing 5. Controlling

Instructor: Ker Channarin

Ch 4-12

Management
Function Planning Organizing Motivating Staffing Controlling Stage When Most Important
Strategy Formulation

Strategy Implementation

Strategy Implementation

Strategy Implementation

Strategy Evaluation

Instructor: Ker Channarin

Ch 4-13

Management
Planning

Beginning of management process Bridge between present & future Improves likelihood of attaining desired results

Instructor: Ker Channarin

Ch 4-14

Management

Forecasting Establishing objectives Planning Devising strategies Developing policies Setting goals

Instructor: Ker Channarin

Ch 4-15

Management
Organizing

Achieves coordinated effort Defines task & authority relationships Departmentalization Delegation of authority

Instructor: Ker Channarin

Ch 4-16

Management

Organizing

Organizational design Job specialization Job descriptions Job specifications Span of control Unity of command Coordination Job design Job analysis

Instructor: Ker Channarin

Ch 4-17

Management
Motivating

Influencing to accomplish specific objectives Communication major component

Instructor: Ker Channarin

Ch 4-18

Management

Motivating

Leadership Communication Work groups Job enrichment Job satisfaction Needs fulfillment Organizational change Morale

Instructor: Ker Channarin

Ch 4-19

Management
Staffing

Personnel management Human resource management

Instructor: Ker Channarin

Ch 4-20

Management
Wage & salary admin. Employee benefits Interviewing Hiring Discharging Training Management development Affirmative action EEO Labor relations

Staffing

Instructor: Ker Channarin

Ch 4-21

Management
Controlling

Establishing performance standards Ensure actual operations conform to planned operations Taking corrective actions

Instructor: Ker Channarin

Ch 4-22

Management

Controlling

Quality Financial Sales Inventory Expense Analysis of variance Rewards Sanctions

Instructor: Ker Channarin

Ch 4-23

Management Audit Checklist


Does the firm use strategic management concepts? Are objectives/goals measurable? Well communicated? Do managers at all levels plan effectively?

Instructor: Ker Channarin

Ch 4-24

Management Audit Checklist


Do managers delegate well? Is the organizations structure appropriate? Are job descriptions clear? Are job specifications clear? Is employee morale high?

Instructor: Ker Channarin

Ch 4-25

Management Audit Checklist


Is employee absenteeism low? Is employee turnover low? Are the reward mechanisms effective? Are the organizations control mechanisms effective?

Instructor: Ker Channarin

Ch 4-26

Marketing
Customer Needs/Wants for Products/Services

1. Defining 2. Anticipating 3. Creating 4. Fulfilling

Instructor: Ker Channarin

Ch 4-27

Marketing
Marketing Functions
1. Customer analysis 2. Selling products/services 3. Product & service planning 4. Pricing 5. Distribution 6. Marketing research 7. Opportunity analysis

Instructor: Ker Channarin

Ch 4-28

Marketing
Opportunity Analysis
1. Are markets segmented effectively? 2. Is the organization positioned well among competitors? 3. Has the firms market share been increasing? 4. Are the distribution channels reliable & cost effective? 5. Is the sales force effective?

Instructor: Ker Channarin

Ch 4-29

Marketing
Opportunity Analysis 6. Does the firm conduct market research?

7. Are product quality & customer service good? 8. Are the firms products/services priced appropriately? 9. Does the firm have effective promotion, advertising, and publicity strategies?

Instructor: Ker Channarin

Ch 4-30

Marketing
Opportunity Analysis

10. Are the marketing, planning, and budgeting effective? 11. Do the firms marketing managers have adequate experience and training?

Instructor: Ker Channarin

Ch 4-31

Finance/Accounting

Determining financial strengths & weaknesses key to strategy formulation

Instructor: Ker Channarin

Ch 4-32

Finance/Accounting
Finance/Accounting Functions

1. Investment decision (Capital budgeting) 2. Financing decision 3. Dividend decision

Instructor: Ker Channarin

Ch 4-33

Basic Financial Ratios

Firms ability to meet its short-term obligations


Liquidity Ratios

Ratios Current ratio Quick (or acid test) ratio

Instructor: Ker Channarin

Ch 4-34

Basic Financial Ratios

Extent of debt financing

Ratios
Leverage Ratios

Debt-to-total-assets Debt-to-equity Long-term debt-to-equity Times-interest-earned

Instructor: Ker Channarin

Ch 4-35

Basic Financial Ratios

Effective use of firms resources


Activity Ratios

Ratios
Inventory turnover Fixed assets turnover Total assets turnover Accounts receivable turnover Average collection period

Instructor: Ker Channarin

Ch 4-36

Basic Financial Ratios

Effectiveness shown by returns on sales & investment


Profitability Ratios

Ratios
Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA)

Instructor: Ker Channarin

Ch 4-37

Basic Financial Ratios

Firms ability to maintain economic position


Growth Ratios

Ratios
Sales Net income Earnings per share Dividends per share

Instructor: Ker Channarin

Ch 4-38

Finance/Accounting Audit
Does the firm have sufficient working capital? Are capital budgeting procedures effective? Are dividend payout policies reasonable? Are the firms financial managers experienced & well trained?

Instructor: Ker Channarin

Ch 4-39

Finance/Accounting Audit
Effective Financial Analysis Requires: 1. Analysis of how the ratios have changed over time 2. How the ratios compare to industry norms 3. How the ratios compare with key competitors

Instructor: Ker Channarin

Ch 4-40

Production/Operations Production/Operations Functions

Process Capacity Inventory Workforce Quality


Instructor: Ker Channarin Ch 4-41

Production/Operations Audit
Are suppliers of materials, parts, etc. reliable and reasonable? Are facilities, equipment, and machinery in good condition? Are inventory-control policies and procedures effective?

Instructor: Ker Channarin

Ch 4-42

Production/Operations Audit Are quality-control policies & procedures effective? Are facilities, resources, and markets strategically located? Does the firm have technological competencies?

Instructor: Ker Channarin

Ch 4-43

Research & Development


Research & Development Functions

Development of new products before competitors Improving product quality Improving manufacturing processes to reduce costs

Instructor: Ker Channarin

Ch 4-44

Research & Development Audit


Are the R&D facilities adequate? If R&D is outsourced, is it costeffective? Are the R&D personnel well qualified? Are R&D resources allocated effectively?

Instructor: Ker Channarin

Ch 4-45

Research & Development Audit


Are MIS and computer systems adequate? Is communication between R&D and other organizational units effective? Are present products technologically competitive?

Instructor: Ker Channarin

Ch 4-46

Management Information Systems

Purpose

Improve performance of an enterprise by improving the quality of managerial decisions

Instructor: Ker Channarin

Ch 4-47

Management Information Systems


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

Instructor: Ker Channarin

Ch 4-48

Management Information Systems Audit


Do managers use the information system to make decisions? Is there a CIO or Director of Information Systems position in the firm? Is data updated regularly?

Instructor: Ker Channarin

Ch 4-49

Management Information Systems Audit


Do managers from all functional areas contribute input to the information system? Are there effective passwords for entry into the firms information system? Are strategists of the firm familiar with the information systems of rival firms?

Instructor: Ker Channarin

Ch 4-50

Management Information Systems Audit


Is the information system userfriendly? Do all users understand the competitive advantages that information can provide? Are computer training workshops provided for users? Is the firms system being improved?

Instructor: Ker Channarin

Ch 4-51

An IFE Matrix is developed in five steps.

1.List key internal factors, Use a total from ten to twenty internal factors including both strengths and weaknesses. 2.Assign a weight ranging from 0 (not important) to 1.0 (very important). The weight indicates the relative importance of the factor to being successful in the firms industry. The sum of all the weights must equal 1.0.
Instructor: Ker Channarin Ch 4-52

3. Assign a 1-4 rating to each factor to indicate whether that factor represents a 1= major weakness 2=minor weakness 3= minor strength 4=major strength
Instructor: Ker Channarin Ch 4-53

An IFE Matrix is developed in five steps (cont)

4.Multiply each factors weight by its rating to determine a weighted score for each variable. 5.Sum the weighted scores for each variable to determine the total weighted score for the organization. Total weighted scores of below 2.5 indicate an internally weak organization.

Instructor: Ker Channarin

Ch 4-54

Instructor: Ker Channarin

Ch 4-55

Instructor: Ker Channarin

Ch 4-56

Chapter 5 Strategies in Action

Strategic Management: Concepts & Cases 12th Edition Fred David

Ch 5 -1

Long-Term Objectives

Results expected from pursuing certain strategies. Strategies represent actions to accomplish long-term objectives.

Ch 5 -2

Objective should be:

Quantifiable Measurable Realistic Understandable Challenging

Hierarchical Obtainable Congruent Time-line

Ch 5 -3

Long-Term Objectives
Objectives Necessary --

Corporate Level Divisional Level Functional Level

Ch 5 -4

Financial vs. Strategic Objectives Financial Objectives Growth in revenues Growth in earnings Higher dividends Higher profit margins Higher Earnings per share Improved cash flow
Ch 5 -5

Financial vs. Strategic Objectives Strategic Objectives Larger market share Quicker on-time delivery than rivals Quicker design-to-market times than rivals Lower costs than rivals Higher product quality than rivals Wider geographic coverage than rivals
Ch 5 -6

Types of Strategies
A Large Company
Corp Level

Division Level

Functional Level

Operational Level
Ch 5 -7

Types of Strategies
Forward Integration
Vertical Integration Strategies

Backward Integration Horizontal Integration

Ch 5 -8

Forward and Backward integration strategies Forward integration: involves gaining ownership or increased control over distributors or retailers Backward integration is a strategy of seeking ownership or increased control of a firms suppliers.
Ch 5 -9

Forward Integration Strategies


Current distributors expensive or unreliable Availability of quality distributors limited Firm competes in industry expected to grow markedly Firm has both capital & HR to manage new business of distribution Current distributors have high profit margins

Ch 5 -10

Backward Integration Strategies Current suppliers expensive or unreliable # of suppliers is small; # competitors is large High growth in industry sector Firm has both capital & HR to manage new business Stable prices are important Current suppliers have high profit margins
Ch 5 -11

Horizontal Integration

Horizontal integration refers to a strategy of seeking ownership of or increased control over a firms competitors.

Ch 5 -12

Horizontal Integration Strategies


Gain monopolistic characteristics without federal government challenge Competes in growing industry Increased economies of scale major competitive advantages Faltering due to lack of managerial expertise or need for particular resource

Ch 5 -13

Types of Strategies
Market Penetration
Intensive Strategies

Market Development Product Development

Ch 5 -14

Market Penetration Strategies

Increased Market Share:

Present products/services Present markets Greater marketing efforts


Ch 5 -15

Five guidelines for when market penetration is especially effective


When current markets are not saturated. When usage rate of current customers could be

increased. When market shares of major competitors have been declining while total industry sales have been increasing. When the correlation between dollar sales and dollar marketing expenditures historically has been high. When increased economies of scale provide major advantages.
Ch 5 -16

Market Development Strategies New Markets :

Present products/services to new geographic areas

Ch 5 -17

Market Development Strategies


Guidelines -New channels of distribution reliable, inexpensive, good quality
Firm is successful at what it does Untapped/unsaturated markets Excess production capacity Basic industry rapidly becoming global
Ch 5 -18

Product Development Strategies

Increased Sales --

Improving present products/services Developing new products/services

Ch 5 -19

Product Development Strategies


Guidelines -Products in maturity stage of life cycle characterized by rapid technological development offer better-quality products at comparable prices
Compete Strong Competitors Industry

in high-growth industry

R&D capabilities
Ch 5 -20

Types of Strategies
Concentric Diversification
Diversification Strategies

Conglomerate Diversification Horizontal Diversification

Ch 5 -21

Concentric Diversification Strategies


Addition New & related products/services
Guidelines: Compete in no/slow growth industry New & related products increases sales of current products New & related products offered at competitive prices Current productsdecline stage of product life cycle Strong management team
Ch 5 -22

Conglomerate Diversification Strategies

Addition New & unrelated products/services Guideline: Declining annual sales & profits Capital & managerial ability to compete in new industry Financial synergy between acquired and acquiring firms Current markets for present products saturated
Ch 5 -23

Horizontal Diversification Strategies


Addition New & unrelated products/services

for current customers Guidelines: Adding new products/services would significantly increase revenues Highly competitive and/or no-growth industry; low margins & returns Current distribution channels can be used New products have counter cyclical sales patterns
Ch 5 -24

Types of Strategies Retrenchment Defensive Strategies

Divestiture

Liquidation

Ch 5 -25

Retrenchment Strategies Cost & asset reduction to reverse declining sales & profit Guidelines Firm is one of weaker competitors Inefficiency, low profitability, poor employee morale, pressure for stockholders Strategic managers have failed Failed to meet objectives & goals consistency; has distinctive competencies Rapid growth in size; major internal reorganization necessary
Ch 5 -26

Divestiture Strategies

Selling a division or part of an organization. Guidelines: Retrenchment failed to attain improvements Division needs more resources than are available Division responsible for firms overall poor performance Division is a mis-fit with organization Large amount of cash is needed and cannot be raised through other sources
Ch 5 -27

Liquidation Strategies Selling Companys assets, in parts, for their tangible worth Guidelines: Retrenchment & divestiture failed Only alternative is bankruptcy Minimize stockholder loss by selling firms assets
Ch 5 -28

Michael Porters Generic Strategies


Cost Leadership Strategies (Low-Cost & Best-Value)

Differentiation Strategies

Focus Strategies (Low-Cost Focus & Best-Value Focus)

Ch 5 -29

Ch 5 -30

Generic Strategies Cost Leadership


In conjunction with differentiation Economies or diseconomies of scale Capacity utilization achieved

Linkages with suppliers & distributors


Ch 5 -31

Generic Strategies Low Cost Producer Advantage


Many Few

price-sensitive buyers

ways of achieving differentiation

not sensitive to brand differences


Large

Buyers

# of buyers with bargaining power


Ch 5 -32

Generic Strategies

Differentiation
Greater product flexibility Greater compatibility Lower costs Improved service Greater convenience More features
Ch 5 -33

Generic Strategies Focus Industry segment of sufficient size Good growth potential Not crucial to success of major competitors

Ch 5 -34

Joint Venture/Partnering

Two or more companies form a temporary partnership or consortium for purpose of capitalizing on some opportunity. Guidelines: Domestic with foreign firm, local management can reduce risk Complementary distinctive competencies Resources & risks where project is highly profitable Two or more smaller firms competing with larger firm Need to introduce new technology quickly
Ch 5 -35

Mergers & Acquisitions


Mergers and acquisitions are two commonly used ways to pursue strategies. A merger occurs when two organizations of about equal size unite to form one enterprise. An acquisition occurs when a large organization purchases (acquires) a smaller firm or vice versa.
Ch 5 -36

There are many reasons for mergers and acquisitions, including the following:
Provide improved capacity utilization Better use of existing sales force Reduce managerial staff Gain economies of scale Smooth out seasonal trends in sales Gain new technology Access to new suppliers, distributors,

customers, products, creditors


Ch 5 -37

Strategic Management in Nonprofit and Governmental Organizations

Educational Institutions Medical Organizations Governmental Agencies and Departments

Ch 5 -38

Functional-Level Strategy
An organizational strategy that supports the business-level strategy. Functional strategies involve all of major functions including production, marketing, human resources, research and development, and finance, these strategies need to support the business-level strategy.

Ch 5 -39

Chapter 6 Strategy Analysis & Choice

Strategic Management: Concepts & Cases 12th Edition Fred David

Ch 6 -1

Strategy Analysis & Choice Nature of Strategy Analysis & Choice

long-term objectives -- Generating alternative strategies -- Selecting strategies to pursue -- Best alternative - achieve mission & objectives

-- Establishing

Ch 6 -2

Strategy Analysis & Choice Alternative Strategies Derive From -Vision Mission Objectives External audit Internal audit Past successful strategies

Ch 6 -3

Ch 6 -4

Comprehensive Strategy-Formulation Framework Stage 1: The Input Stage

Stage 2: The Matching Stage

Stage 3: The Decision Stage

Ch 6 -5

Strategy-Formulation Analytical Framework

Internal Factor Evaluation Matrix (IFE)

Stage 1: The Input Stage

External Factor Evaluation Matrix (EFE)

Competitive Profile Matrix (CPM)

Ch 6 -6

Stage 1: The Input Stage Basic input information for the matching & decision stage matrices Requires strategists to quantify subjectivity early in the process Good intuitive judgment always needed

Ch 6 -7

Strategy-Formulation Analytical Framework

SWOT Matrix SPACE Matrix

Stage 2: The Matching Stage

BCG Matrix IE Matrix


Grand Strategy Matrix

Ch 6 -8

Stage 2: The Matching Stage

Match between organizations internal resources & skills and the opportunities & risks created by its external factors

Ch 6 -9

Stage 2: The Matching Stage

SWOT Matrix Strengths Weaknesses Opportunities Threats


Ch 6 -10

SWOT Matrix
Four Types of Strategies

Strengths-Opportunities (SO) Weaknesses-Opportunities (WO) Strengths-Threats (ST) Weaknesses-Threats (WT)


Ch 6 -11

SO Strategies
Strengths Weaknesses Opportunities Threats SWOT

SO Strategies

Use a firms internal strengths to take advantage of external opportunities

Ch 6 -12

WO Strategies
Strengths Weaknesses Opportunities Threats SWOT Improving internal weaknesses by taking advantage of external opportunities

WO Strategies

Ch 6 -13

ST Strategies
Strengths Weaknesses Opportunities Threats SWOT Use a firms strengths to avoid or reduce the impact of external threats

ST Strategies

Ch 6 -14

WT Strategies
Strengths Weaknesses Opportunities Threats SWOT Defensive tactics aimed at reducing internal weaknesses & avoiding environmental threats

WT Strategies

Ch 6 -15

There are eight steps to construct a SWOT Matrix: 1.List the firms key external opportunities. 2.List the firms key external threats. 3.List the firms key internal strengths. 4.List the firms key internal weaknesses. 5.Match internal strengths with external opportunities and record the resulting SO strategies in the appropriate cell.

Ch 6 -16

There are eight steps to construct a SWOT Matrix: (contd)

6.Match internal weaknesses with external opportunities and record the resulting WO strategies. 7.Match internal strengths with external threats and record the resultant ST strategies. 8.Match internal weaknesses with external threats and record the resulting WT strategies.
Ch 6 -17

SWOT Matrix

Leave Blank
Opportunities O

Strengths S Weaknesses W
List Strengths List Weaknesses

SO
Strategies

WO Strategies

Overcoming List Opportunities Use strengths to weaknesses by take advantage taking advantage of opportunities of opportunities

Threats T
List Threats

ST Strategies WT Strategies
Use strengths to Minimize avoid threats weaknesses and avoid threats
Ch 6 -18

SPACE Matrix
Strategic Position & Action Evaluation Matrix

Aggressive Conservative Defensive Competitive

Ch 6 -19

SPACE Matrix Two Internal Dimensions

Financial Strength (FS) Competitive Advantage (CA)

Ch 6 -20

SPACE Matrix Two External Dimensions

Environmental Stability (ES) Industry Strength (IS)

Ch 6 -21

SPACE Factors
Internal Strategic Position External Strategic Position

Financial Strength (FS)


Return on investment Leverage Liquidity Working capital Cash flow Inventory turnover Earnings per share Price earnings ratio

Environmental Stability (ES)


Technological changes Rate of inflation Demand variability Price range of competing products Barriers to entry Competitive pressure Price elasticity of demand Ease of exit from market Risk involved in business
Ch 6 -22

SPACE Factors
Internal Strategic Position External Strategic Position

Competitive Advantage (CA)


Market share Product quality Product life cycle Customer loyalty Competitions capacity utilization Technological know-how Control over suppliers & distributors

Industry Strength (IS)


Growth potential Profit potential Financial stability Technological know-how Resource utilization Ease of entry into market Productivity, capacity utilization

Ch 6 -23

Steps to Developing a SPACE Matrix


Select a set of variables to define FS, CA, ES, and IS. 2. Assign a numerical value:
1.

From +1 to +6 to each FS & IS dimension From -1 to -6 to each ES & CA dimension

3.

Compute an average score for each FS, CA, ES, and IS.

Ch 6 -24

Steps to Developing a SPACE Matrix


4. 5.

6.

Plot the average score on the appropriate axis. Add the two scores on the x-axis and plot the point. Add the two scores on the y-axis and plot the point. Plot the intersection of the new xy point. Draw a directional vector from the origin through the new intersection point.

Ch 6 -25

Ch 6 -26

BCG Matrix Boston Consulting Group Matrix


Enhances multidivisional firm in formulating strategies Autonomous divisions = business portfolio Divisions may compete in different industries Focus on market-share position & industry growth rate

Ch 6 -27

BCG Matrix Relative Market Share Position


Ratio of a divisions own market share in an industry to the market share held by the largest rival firm in that industry

Ch 6 -28

Ch 6 -29

BCG Matrix Question Marks


Low relative market share, competes in high-growth industry Cash needs are high Case generation is low Decision to strengthen (intensive strategies) or divest

Ch 6 -30

BCG Matrix Stars


High relative market share and high growth rate Best long-run opportunities for growth & profitability Substantial investment to maintain or strengthen dominant position Integration strategies, intensive strategies, joint ventures
Ch 6 -31

BCG Matrix Cash Cows


High relative market share, competes in lowgrowth industry Generate cash in excess of their needs Milked for other purposes Maintain strong position as long as possible Product development, concentric diversification If weakens retrenchment or divestiture
Ch 6 -32

BCG Matrix Dogs


Low relative market share, competes in slow or no market growth Weak internal & external position Liquidation, divestiture, retrenchment

Ch 6 -33

The Internal-External Matrix


Positions an organizations various divisions

in a nine-cell display Similar to BCG Matrix except the IE Matrix: Requires more information about the divisions Strategic implications of each matrix are different

Ch 6 -34

Ch 6 -35

IE Matrix
Based on two key dimensions The IFE total weighted scores on the x-axis The EFE total weighted scores on the y-axis Divided into three major regions Grow and build Cells I, II, or IV Hold and maintain Cells III, V, or VII Harvest or divest Cells VI, VIII, or IX

Ch 6 -36

Grand Strategy Matrix

Tool for formulating alternative strategies

Based on two dimensions


Competitive position Market growth

Ch 6 -37

RAPID MARKET GROWTH


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

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 STRONG COMPETITIVE POSITION

WEAK COMPETITIVE POSITION


1. 2. 3. 4. 5.

Quadrant III Retrenchment Concentric diversification Horizontal diversification Conglomerate diversification Liquidation

1. 2. 3. 4.

Quadrant IV Concentric diversification Horizontal diversification Conglomerate diversification Joint ventures

SLOW MARKET GROWTH


Ch 6 -38

Grand Strategy Matrix


Quadrant I

Excellent strategic position Concentration on current markets/products Take risks aggressively when necessary

Ch 6 -39

Grand Strategy Matrix


Quadrant II

Evaluate present approach How to improve competitiveness Rapid market growth requires intensive strategy

Ch 6 -40

Grand Strategy Matrix


Quadrant III

Compete in slow-growth industries Weak competitive position Drastic changes quickly Cost & asset reduction (retrenchment)

Ch 6 -41

Grand Strategy Matrix


Quadrant IV

Strong competitive position Slow-growth industry Diversification to more promising growth areas

Ch 6 -42

Strategy-Formulation Analytical Framework

Stage 3: The Decision Stage

Quantitative Strategic Planning Matrix (QSPM)

Ch 6 -43

QSPM
Quantitative Strategic Planning Matrix

Technique designed to determine the relative attractiveness of feasible alternative actions

Ch 6 -44

QSPM
Key External Factors Economy Political/Legal/Governmental Social/Cultural/Demographic/E nvironmental Technological Competitive Key Internal Factors Management Marketing Finance/Accounting Production/Operations Research and Development Computer Information Systems

Strategic Alternatives
Weight Strategy 1 Strategy 2 Strategy 3

Ch 6 -45

Steps to Develop a QSPM


Make a list of the firms key external opportunities/threats and internal strengths/weaknesses in the left column. 2. Assign weights to each key external and internal factor. 3. Examine the Stage 2 (matching) matrices, and identify alternative strategies that the organization should consider implementing.
1.

Ch 6 -46

Steps to Develop a QSPM


Determine the Attractiveness Scores. 5. Compare the Total Attractiveness Scores. 6. Compute the Sum Total Attractiveness Score.
4.

Ch 6 -47

Key External Factors

Weight

Buy new land and build new larger store

Fully renovate existing store

Opportunities
1.population

AS 0.10 0.10 0.08 0.05 0.05 0.10 0.06 0.06 4 2 1 -

TAS 0.40 0.20 0.08

AS 2 4 4 -

TAS 0.20 0.40 0.32

of city growing 10%

2.Rival computer store opening 1 kilometer away 3Vehicle traffic passing store up 12% 4.Vendors average six new product per year 5.Senior citizen use of computers up 8% 6.Small business growth in area up 10% 7. desire for web sites up 18% by Realtors 8.Desire for web site up 12% by small firms Threats
1.Best

buy opening new store in 1 years nearby

0.10 0.08 0.10 0.05 0.04 0.03 1.00

4 4 2 -

0.40 0.40 0.10 1.58

3 1 4 -

0.30 0.10 0.20 1.52

2.Local university offers computer repair 3.New bypass Hwy34 in 1 year will divert traffic 4.New mall being build nearby 5.Gas price up 14% 6.Vendors raising price 8%

Ch 6 -48

Strategic Alternatives Key Internal Factors Strengths Weight Buy new land and build new larger store AS TAS Fully renovate existing store AS TAS

1.Inventory turnover up 5.8 to6.8 2.Average customer purchase up $97 to $128 3.Employee morale is excellent 4.In- store promotion in 20% increase in sales 5.Newspaper advertising expenditures down 10% 6.Revenues from repair/service in store up 16% 7.In store technical support persons have MIS degrees 8.Stores debt-to-total asset ratio down 34% 9.Revenues per employee up 19%
Weaknesses

0.05 0.07 0.10 0.05 0.02 0.15 0.05 0.03 0.02

0.14

0.28

4 4 -

0.60 0.12 -

3 2 -

0.45 0.06 -

1.Software revenues in store down12% 2.Location of store hurt by new Hwy 34 3.Carpet and paint in store in disrepair 4. Bathroom in store needs refurbishing 5.Total store revenues down 8% 6. Store ha no web site 7.Supplier on time delivery up to 2.4 days 8.Customer checkout process too slow

0.10 0.15 0.02 0.02 0.04 0.05 0.03 0.05


1.00

4 1 1 3 2

0.60 0.02 0.02 0.12 0.10


1.72

1 4 4 4 4

0.15 0.08 0.08 0.16 0.20


1.46

Total

2.00

3.30

Ch 6 -49 2.98

QSPM
Limitations

Requires intuitive judgments & educated assumptions Only as good as the prerequisite inputs

Ch 6 -50

QSPM
Advantages

Sets of strategies considered simultaneously or sequentially Integration of pertinent external & internal factors in the decision-making process

Ch 6 -51

Chapter 7 Implementing Strategies: Management & Operations Issues


Strategic Management: Concepts & Cases 12th Edition Fred David

Instructor: Ker Channarin

Ch 7-1

Nature of Strategy Implementation


Formulation vs. Implementation
Formulation focuses on effectiveness Implementation focuses on efficiency

Instructor: Ker Channarin

Ch 7-2

Nature of Strategy Implementation


Management Perspectives

Shift in responsibility
Division or Functional Managers

Strategists

Instructor: Ker Channarin

Ch 7-3

Management Issues
Annual Objectives Policies Resources Organizational Structure Restructuring Rewards/Incentives

Management Issues

Instructor: Ker Channarin

Ch 7-4

Management Issues (contd)


Resistance to Change Natural Environment Supportive Culture Production/Operations Human Resources

Management Issues

Instructor: Ker Channarin

Ch 7-5

Management Issues Purpose of Annual Objectives -Basis for resource allocation Mechanism for management evaluation Metric for gauging progress on longterm objectives Establish priorities (organizational, division, & departmental)

Instructor: Ker Channarin

Ch 7-6

Management Issues Four Types of Resources

1. Financial resources 2. Physical resources 3. Human resources 4. Technological resources

Instructor: Ker Channarin

Ch 7-7

Managing Conflict -- Disagreement between two more parties

on one or more issues Conflict not always bad No conflict may signal apathy Can energize opposing groups to action May help managers identify problems

Instructor: Ker Channarin

Ch 7-8

Management Issues Basic Forms of Structure

Functional Structure Divisional Structure Strategic Business Unit Structure (SBU) Matrix Structure
Instructor: Ker Channarin Ch 7-9

Instructor: Ker Channarin

Ch 7-10

Instructor: Ker Channarin

Ch 7-11

Instructor: Ker Channarin

Ch 7-12

Policies
Broadly defined, policy refers to specific guidelines, methods, procedures, rules, forms, and administrative practices established to support and encourage work toward stated goals. Facilitate the solving or recurring problems and guide implementation of strategy
Instructor: Ker Channarin Ch 7-13

Restructuring -- Reducing

the size of the firm # of employees, divisions, and/or units, # of hierarchical levels Downsizing Rightsizing Delayering

Instructor: Ker Channarin

Ch 7-14

Reengineering

Reconfiguring or redesigning work, job, and process to improve cost, quality, service and speed. Process management Process innovation Process redesign

Instructor: Ker Channarin

Ch 7-15

Linking Pay/Performance to Strategies

-- Pay for performance systems


Dual bonus systems Profit sharing systems Gain Sharing systems

Instructor: Ker Channarin

Ch 7-16

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?
Instructor: Ker Channarin Ch 7-17

Resistance to Change
-- Single greatest threat to successful strategy implementation -- Raises anxiety; fear concerning Economic loss Inconvenience Uncertainty Break in status-quo

Instructor: Ker Channarin

Ch 7-18

Change Strategies
Force Change Strategy Educative Change Strategy Rational or Self-Interest Change Strategy

Instructor: Ker Channarin

Ch 7-19

Natural Environment -- Wide appreciation for firms that

mend rather than harm the environment Develop/acquire green business Divesting environmental-damaging business

Instructor: Ker Channarin

Ch 7-20

Creating a Strategy-Supportive Culture

Instructor: Ker Channarin

Ch 7-21

Management Issues
Production/Operations Concerns

Production processes typically constitute more than 70% of firms total assets

Instructor: Ker Channarin

Ch 7-22

Management Issues
Production/Operations Decisions

Plant size Inventory/Inventory control Quality control Cost control Technological innovation
Instructor: Ker Channarin Ch 7-23

Management Issues
Human Resource Strategic Responsibilities

Assessing staffing needs/costs Developing performance incentives ESOPs Child-care policies Worklife balance issues
Instructor: Ker Channarin Ch 7-24

Benefits of a Diverse Workforce


Improves corporate culture Improves employee morale Leads to a higher retention of employees Leads to easier recruitment of employees Decreases complaints and litigation Increases creativity Decreases interpersonal conflict

Instructor: Ker Channarin

Ch 7-25

Instructor: Ker Channarin

Ch 7-26

Benefits of a Diverse Workforce Enables the organization to move into emerging markets Improves client relations Increases productivity Improves the bottom line Maximizes brand identity Reduces training costs
Instructor: Ker Channarin Ch 7-27

Chapter 8 Implementing Strategies: Marketing, Finance/Accounting, R&D, and MIS Issues

Strategic Management: Concepts & Cases 12th Edition Fred David

Instructor: Ker Channarin

Ch 8-1

The Nature of Strategy Implementation

Strategy implementation means change

Instructor: Ker Channarin

Ch 8-2

The Nature of Strategy Implementation


Low Success Rate Strategy Implementation Failing to segment markets appropriately Paying too much for a new acquisition Falling behind competition in R&D Not recognizing benefit of computers in managing information

Instructor: Ker Channarin

Ch 8-3

The Nature of Strategy Implementation


Successful Strategy Implementation Market goods & services well Raise needed working capital Produce technologically sound goods Sound information systems

Instructor: Ker Channarin

Ch 8-4

Marketing Issues

of strategy implementation

Marketing variables affect success/failure

Instructor: Ker Channarin

Ch 8-5

Marketing Issues
Marketing decisions requiring policies Exclusive dealerships multiple channels of distribution Heavy, light, or no TV advertising Price leader or price follower Advertise online or not Offer complete or limited warranty

Instructor: Ker Channarin

Ch 8-6

Marketing Issues
Centrally important to Implementation

1. Market segmentation 2. Product positioning

Instructor: Ker Channarin

Ch 8-7

Marketing Issues
Market Segmentation

Subdividing of a market into distinct

subsets of customers according to needs and buying habits

Instructor: Ker Channarin

Ch 8-8

Marketing Issues Market Segmentation


Key to matching supply & demand Market-development, product-development, market-penetration, and diversification strategies Allows operating with limited resources Enables small firms to compete successfully
Instructor: Ker Channarin Ch 8-9

Marketing Issues
Market Segmentation Directly affect marketing mix variables: Product Place Promotion Price

Instructor: Ker Channarin

Ch 8-10

Instructor: Ker Channarin

Ch 8-11

Marketing Issues
Geographic

Demographic

Market Segment Basis

Psychographic

Behavioral

Instructor: Ker Channarin

Ch 8-12

Marketing Issues Demographic


Age Family size Family life cycle Income/occupation Education Religion Race/nationality

Instructor: Ker Channarin

Ch 8-13

Marketing Issues Psychographic


Social class Lifestyle Personality

Instructor: Ker Channarin

Ch 8-14

Marketing Issues
Behavioral Use occasion Benefits sought User status Usage rate Loyalty status Readiness stage Attitude toward product

Instructor: Ker Channarin

Ch 8-15

Marketing Issues Product Positioning


Schematic representations that reflect how

products/services compare to competitors on dimensions most important to success in the industry

Instructor: Ker Channarin

Ch 8-16

Marketing Issues
Customer Wants

Product Positioning
Customer Needs

Instructor: Ker Channarin

Ch 8-17

Product Positioning Steps


1. Select Key Criteria

2. Diagram Map 3. Plot Competitors Products 4. Look for Niches 5. Develop Marketing Plan
Instructor: Ker Channarin Ch 8-18

Product-Positioning Steps

Instructor: Ker Channarin

Ch 8-19

Finance/Accounting Issues

Central to strategy implementation

Instructor: Ker Channarin

Ch 8-20

Finance/Accounting Issues
Essential for Implementation Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating worth of a business

Instructor: Ker Channarin

Ch 8-21

Finance/Accounting Issues
Decisions Based on Finance/Accounting

Raise capital short-term, long-term, preferred, or common stock Lease or buy fixed assets Determine appropriate dividend payout ratio

Instructor: Ker Channarin

Ch 8-22

Finance/Accounting Issues
Capital Acquisition to Implement Strategies

Debt Equity

Instructor: Ker Channarin

Ch 8-23

Finance/Accounting Issues
Debt vs. Equity Decisions
EPS/EBIT analysis

Earnings per share/earnings before interest

and taxes

Instructor: Ker Channarin

Ch 8-24

Finance/Accounting Issues
Projected Financial Statements
Allow an organization to examine the expected

results of various actions and approaches

Instructor: Ker Channarin

Ch 8-25

Finance/Accounting Issues
Steps in Preparing Projected Financial Statements
1. Prepare income statement before balance

sheet (forecast sales). CGS & expenses.

2. Use percentage of sales method to project 3. Calculate projected net income.

Instructor: Ker Channarin

Ch 8-26

Finance/Accounting Issues
Steps in Preparing Projected Financial Statements (contd)
4. Subtract dividends to be paid from net income and

add remaining to retained earnings. earnings.

5. Project balance sheet items beginning with retained

6. List comments (remarks) on projected statements.

Instructor: Ker Channarin

Ch 8-27

Instructor: Ker Channarin

Ch 8-28

Finance/Accounting Issues
Financial Budget Details how funds will be obtained and spent for a specified period of time

Instructor: Ker Channarin

Ch 8-29

Finance/Accounting Issues
Types of Budgets Cash budgets Operating budgets Sales budgets Profit budgets Factory budgets Expense budgets

Instructor: Ker Channarin

Ch 8-30

Finance/Accounting Issues
Evaluating Worth of a Business

Central to strategy implementation

integrative, intensive, and diversification strategies often implemented through acquisitions of other firms

Instructor: Ker Channarin

Ch 8-31

Finance/Accounting Issues
Evaluating Worth of a Business: Three Basic Approaches

1. What a firm owns 2. What a firm earns 3. What a firm will bring in the market

Instructor: Ker Channarin

Ch 8-32

Research & Development Issues


New products and improvement of

existing products that allow for effective strategy implementation

Instructor: Ker Channarin

Ch 8-33

Research & Development Issues

Constraints Level of support constrained by resource availability Technological improvements shorten product life cycles

Instructor: Ker Channarin

Ch 8-34

Research & Development Issues

Three Major R&D Approaches to Implementing Strategies


1. 1st firm to market new technological

products 2. Innovative imitator of successful products 3. Low-cost producer of similar but less expensive products

Instructor: Ker Channarin

Ch 8-35

Management Information Systems (MIS) Issues

Information is the basis for understanding the firm. Its one of the most important factors differentiating successful from unsuccessful firms.

Instructor: Ker Channarin

Ch 8-36

MIS Issues

Functions of MIS Information collection, retrieval, and storage Keeping managers informed Coordination of activities among divisions Allow firm to reduce costs

Instructor: Ker Channarin

Ch 8-37

Chapter 9 Strategy Review, Evaluation, and Control

Strategic Management: Concepts & Cases 12th Edition Fred David

Instructor: Ker Channarin

Ch 9-1

Strategy Review, Evaluation, and Control

Strategies become obsolete Internal environments are dynamic External environments are dynamic

Instructor: Ker Channarin

Ch 9-2

Strategy Review, Evaluation, and Control Three Basic Activities


1. Examine the underlying bases of a firms

strategy. 2. Compare expected to actual results. 3. Identify corrective actions to ensure that performance conforms to plans.

Instructor: Ker Channarin

Ch 9-3

Strategy Review, Evaluation, and Control Strategy Evaluation


Complex & sensitive undertaking Overemphasis can be costly & counterproductive

Instructor: Ker Channarin

Ch 9-4

Strategy Review, Evaluation, and Control


Appraisal of Strategic Performance

Have assets increased? Increase in profitability? Increase in sales? Increase in productivity? Profit margins, ROI, and EPS ratios increased?

Instructor: Ker Channarin

Ch 9-5

Strategy Review, Evaluation, and Control


Consistency Consonance Feasibility Advantage

Rumelts 4 Criteria

Instructor: Ker Channarin

Ch 9-6

Strategy Evaluation, Review & Control 1-Consistency Strategy should not present inconsistent goals & policies
2-Consonance Need for strategists to examine sets of trends 3-Feasibility Neither overtax resources or create unsolvable subproblems 4-Advantage Creation or maintenance of competitive advantage
Instructor: Ker Channarin Ch 9-7

Strategy Evaluation, Review & Control


Increase in environments complexity Difficulty predicting future with accuracy Increasing number of variables Rate of obsolescence of plans Domestic and global events Decreasing time span for planning certainty
Instructor: Ker Channarin Ch 9-8

Strategy Review, Evaluation, and Control


Review of Underlying Bases of Strategy

Develop revised EFE Matrix Develop revised IFE Matrix

Instructor: Ker Channarin

Ch 9-9

Strategy Review, Evaluation, and Control Review Effectiveness of Strategy


1. Competitors reaction to strategy 2. Competitors change in strategy 3. Competitors changes in strengths &

weaknesses 4. Reasons for competitors strategic change


Instructor: Ker Channarin

Ch 9-10

Strategy Review, Evaluation, and Control Review Effectiveness of Strategy


Reasons for competitors successful strategies 6. Competitors present market positions & profitability 7. Potential for competitor retaliation 8. Potential for cooperation with competitors
5.

Instructor: Ker Channarin

Ch 9-11

Strategy Review, Evaluation, and Control


Monitor Strengths & Weaknesses; Opportunities & Threats
Are strengths still strengths? Have we added additional strengths? Are weaknesses still weaknesses? Have we developed other weaknesses?

Instructor: Ker Channarin

Ch 9-12

Strategy Review, Evaluation, and Control


Monitor Strengths & Weaknesses; Opportunities & Threats
Are opportunities still opportunities? Other opportunities develop? Are threats still threats? Other threats emerged? Are we vulnerable to hostile takeover?

Instructor: Ker Channarin

Ch 9-13

Instructor: Ker Channarin

Ch 9-14

Evaluation Framework
I. Review Underlying Bases Yes

Differences?
NO

II. Measure Firm Performance

Differences?
NO
Continue present course

Yes

III. Take Corrective Actions

Instructor: Ker Channarin

Ch 9-15

Strategy Review, Evaluation, and Control


Measuring Organizational Performance
Compare expected to actual results Investigate deviations from plan Evaluate individual performance Progress toward stated objectives

Instructor: Ker Channarin

Ch 9-16

Strategy Review, Evaluation, and Control


Quantitative Criteria for Strategy Evaluation

Financial Ratios
Compare performance over different periods Compare performance to competitors Compare performance to industry averages

Instructor: Ker Channarin

Ch 9-17

Strategy Evaluation, Review & Control


Key Financial Ratios
Return on investment (ROI) Return on equity (ROE) Profit margin Market Share Debt to equity Earnings per share (EPS) Sales growth Asset growth
Instructor: Ker Channarin Ch 9-18

Strategy Review, Evaluation, and Control


Qualitative Evaluation of Strategy
Internal consistency of strategy Consistency with environment Appropriateness in view of resources

Instructor: Ker Channarin

Ch 9-19

Strategy Review, Evaluation, and Control


Qualitative Evaluation of Strategy
Acceptable degree of risk Appropriate time frame Workability of the strategy

Instructor: Ker Channarin

Ch 9-20

Taking corrective actions The final strategy-evaluation activity, taking corrective action, requires making changes to reposition a firm competitively for the future. Taking corrective action raises employees and managers anxieties. Research suggests that participation in strategy-evaluation activities is one of the best ways to overcome individuals resistance to change
Instructor: Ker Channarin Ch 9-21

Strategy Review, Evaluation, and Control


Balanced Scorecard
Evaluate strategies from 4 perspectives:

1. 2. 3. 4.

Financial performance Customer knowledge Internal business processes Learning & growth

Instructor: Ker Channarin

Ch 9-22

Instructor: Ker Channarin

Ch 9-23

Strategy Review, Evaluation, and Control


Characteristics of Strategy Evaluation
Economical Meaningful Generates useful information Timely information Provides accurate picture of events

Instructor: Ker Channarin

Ch 9-24

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