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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
3
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
5
Ch 1 -1
Ch 1 -2
Strategic Management
Ch 1 -3
Ch 1 -4
Internal S& W
Long-Term Objectives Alternative Strategies Strategy Selection
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
Instructor : Ker Channarin Ch 1 -6
Strategy Implementation
Ch 1 -7
Strategy Implementation Action Stage of Strategic Management Most difficult stage Mobilization of employees & managers Interpersonal skills critical Consensus on goal pursuit
Instructor : Ker Channarin Ch 1 -8
Strategy Evaluation
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
Ch 1 -10
Peter Drucker: -- think through the overall mission of a business. Ask the key question: What is our Business?
Ch 1 -11
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
Instructor : Ker Channarin Ch 1 -13
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?
Instructor : Ker Channarin Ch 1 -14
Key Terms
Strategists Firms success/failure
Various Job Titles: Chief Executive Officer (CEO) Chief Strategy Officer (CSO) President Owner Board Chair Executive Director
Instructor : Ker Channarin Ch 1 -15
Key Terms Vision Statement What do we want to become? Mission Statement What is our business?
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
Instructor : Ker Channarin Ch 1 -17
Performance Metrics
Internal Factors
Industry Averages
Survey Data
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
Instructor : Ker Channarin Ch 1 -20
Strategies : Means by which long-term objectives are achieved Some Examples Geographic expansion Diversification Acquisition Market penetration Retrenchment Liquidation Joint venture
Instructor : Ker Channarin Ch 1 -21
Annual Objective Short-term milestones that firms must achieve to attain long-term objectives Policies Means by which annual objectives will be achieved
Ch 1 -22
Chapter 3
Long-Term Objectives
Chapter 2
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Internal Audit
Chapter 4
Ch 1 -23
Ch 1 -24
Improved understanding of competitors strategies Enhanced awareness of threats Reduced resistance to change Enhanced problem-prevention capabilities
Instructor : Ker Channarin Ch 1 -25
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
Instructor : Ker Channarin Ch 1 -27
favorable attitude toward change discipline and formality to the management of the business
12.Provides
Ch 1 -28
Business Ethics defined as principles of conduct within organizations that guide decision making and behavior. Good business ethics are prerequisite for good strategic management
Instructor : Ker Channarin Ch 1 -29
Misleading advertising Misleading labeling Harm to the environment Insider trading Dumping flawed products on foreign markets Poor product or service safety Padding expense accounts
Instructor : Ker Channarin Ch 1 -30
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.
Ch 2 -2
Vision
Ch 2 -3
Vision
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.
Instructor : Ker Channarin Ch 2 -5
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:______________________ _______________________________________
Ch 2 -7
Shared Vision -Creates commonality of interests Reduce daily monotony Provides opportunity & challenge
Instructor : Ker Channarin Ch 2 -8
Ch 2 -9
Mission Statements
Ch 2 -10
Mission Statements
Ch 2 -11
Mission Statements
Also referred to as:
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 ________
__________________________________ ___
Ch 2 -13
Mission Statements Reveal what an organization wants to be and whom it wants to serve
Ch 2 -14
Clear mission is needed before alternative strategies can be formulated and implemented Participation from diverse managers is important in developing the mission.
Ch 2 -15
Importance of Mission
Benefits from a strong mission
Mission
Organizational Climate Focal point for work structure
Instructor : Ker Channarin Ch 2 -16
Effective Missions
Broad in scope Generate strategic alternatives Not overly specific Reconciles interests among diverse stakeholders Finely balanced between specificity & generality
Ch 2 -17
Effective Missions
Arouse positive feelings & emotions Motivate readers to action Generate favorable impression of the firm
Ch 2 -18
Effective Missions
Reflect future growth Provide criteria for strategy selection Basis for generating & evaluating strategic options Are dynamic in nature
Ch 2 -19
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
Ch 2 -20
Customers
Products Services
Markets
Technology Employees
Mission Elements
Survival Growth Profit
Self-Concept
Public Image
Philosophy
Ch 2 -21
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.
Ch 2 -23
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.
Ch 2 -24
COMPONENT
COMPONENT
COMPONENT
COMPONENT
COMPONENT
Organization
Customers
Products or Services
Markets
Technology
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes No
No No
Yes
Ch 2 -25
No
COMPONENT
COMPONENT
COMPONENT
COMPONENT
Philosophy Yes No No
Ch 2 -26
Ch 3 -1
Ch 3 -2
Identify & evaluate factors beyond the control of a single firm Increased foreign competition Population shifts Aging society Fear of traveling Stock market volatility
Ch 3 -3
Opportunities Threats
Ch 3 -4
Ch 3 -5
External Audit
Gather competitive intelligence
Ch 3 -6
Market share Breadth of competing products World economies Foreign affiliates Proprietary account advantages
Instructor : Ker Channarin Ch 3 -8
Ch 3 -9
Long-term Orientation
External Factors
Measurable
Applicable to Competing Firms Hierarchical
Ch 3 -10
Ch 3 -11
Industry Properties
Economies of Scale Barriers to Market Entry Product Differentiation Level of Competitiveness
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
Instructor : Ker Channarin Ch 3 -13
Major Impact
World population approaching 7 billion World population = 8 billion by 2028 World population = 9 billion by 2054 U.S. population < 300 million
Ch 3 -15
living alone Aging Americans affects all organizations Population shift to the south and west Decimation and degradation of the natural environment
Instructor : Ker Channarin
Ch 3 -16
More educated consumers Aging population Minorities more influential Local rather than federal solutions
Ch 3 -17
Fixation with youth decreasing Hispanics increase to 15% by 2021 African-American increase to 14% by 2021
Instructor : Ker Channarin Ch 3 -18
Childbearing rates Number of special interest groups Number of marriages & divorces Number of births & deaths Immigration & emigration rates
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
Worldwide trend toward similar consumption patterns Global buyers and sellers E-commerce Technology for instant currency transfers
Ch 3 -21
Technological Forces
Major Impact
Ch 3 -22
Technological Forces
Significance of IT
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
Ch 3 -24
Competitive Forces
Identifying Rival Firms
Ch 3 -26
Ch 3 -27
Rivalry Among Competing Firms Most powerful of the five forces Focus on competitive advantage of strategies
Ch 3 -28
Potential Entry of New Competitors Barriers to entry are important Quality, pricing, and marketing can overcome barriers
Ch 3 -29
Potential Development of Substitute Products Pressures increase when consumers switching costs decrease Firms plans for increased capacity & market penetration
Ch 3 -30
Bargaining Power of Suppliers Large number of suppliers & few substitutes affects intensity of competition Backward integration can gain control or ownership of suppliers
Ch 3 -31
Bargaining Power of Consumers Customers concentrated or buying in volume affects intensity of competition Consumer power is higher where products are standard or undifferentiated
Ch 3 -32
Gain & maintain exports to other nations Defend domestic markets against imported goods
Ch 3 -33
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
Ch 3 -35
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
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
rating to get a weighted score. Sum the weighted scores for each variable to determine the total weighted score for the organization.
Ch 3 -38
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
3 2 3 2 2 3 3 2
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
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%
Total
1.00
Ch 3 -40
Ch 3 -41
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
1 4 3
4 3 2
3 2 4
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
Company2
Company3
0.10 0.20
3 1
0.30 0.20
2 2
0.20 0.40
0.05 1.00
0.05 3.15
0.20 2.60
0.15 2.70
Ch 3 -44
Ch 4-1
Ch 4-2
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
Ch 4-5
Internal Audit
Key to Organizational Success
Ch 4-6
Ch 4-7
Ch 4-8
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
Ch 4-9
Ch 4-10
Heroes
Cultural Products
Rites
Symbols
Myths
Rituals
Ch 4-11
Management
Functions of Management
Ch 4-12
Management
Function Planning Organizing Motivating Staffing Controlling Stage When Most Important
Strategy Formulation
Strategy Implementation
Strategy Implementation
Strategy Implementation
Strategy Evaluation
Ch 4-13
Management
Planning
Beginning of management process Bridge between present & future Improves likelihood of attaining desired results
Ch 4-14
Management
Forecasting Establishing objectives Planning Devising strategies Developing policies Setting goals
Ch 4-15
Management
Organizing
Achieves coordinated effort Defines task & authority relationships Departmentalization Delegation of authority
Ch 4-16
Management
Organizing
Organizational design Job specialization Job descriptions Job specifications Span of control Unity of command Coordination Job design Job analysis
Ch 4-17
Management
Motivating
Ch 4-18
Management
Motivating
Leadership Communication Work groups Job enrichment Job satisfaction Needs fulfillment Organizational change Morale
Ch 4-19
Management
Staffing
Ch 4-20
Management
Wage & salary admin. Employee benefits Interviewing Hiring Discharging Training Management development Affirmative action EEO Labor relations
Staffing
Ch 4-21
Management
Controlling
Establishing performance standards Ensure actual operations conform to planned operations Taking corrective actions
Ch 4-22
Management
Controlling
Ch 4-23
Ch 4-24
Ch 4-25
Ch 4-26
Marketing
Customer Needs/Wants for Products/Services
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
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?
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?
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?
Ch 4-31
Finance/Accounting
Ch 4-32
Finance/Accounting
Finance/Accounting Functions
Ch 4-33
Ch 4-34
Ratios
Leverage Ratios
Ch 4-35
Ratios
Inventory turnover Fixed assets turnover Total assets turnover Accounts receivable turnover Average collection period
Ch 4-36
Ratios
Gross profit margin Operating profit margin Net profit margin Return on total assets (ROA)
Ch 4-37
Ratios
Sales Net income Earnings per share Dividends per share
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?
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
Ch 4-40
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?
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?
Ch 4-43
Development of new products before competitors Improving product quality Improving manufacturing processes to reduce costs
Ch 4-44
Ch 4-45
Ch 4-46
Purpose
Ch 4-47
Ch 4-48
Ch 4-49
Ch 4-50
Ch 4-51
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
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.
Ch 4-54
Ch 4-55
Ch 4-56
Ch 5 -1
Long-Term Objectives
Results expected from pursuing certain strategies. Strategies represent actions to accomplish long-term objectives.
Ch 5 -2
Ch 5 -3
Long-Term Objectives
Objectives Necessary --
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
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
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
Ch 5 -13
Types of Strategies
Market Penetration
Intensive Strategies
Ch 5 -14
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
Ch 5 -17
Increased Sales --
Ch 5 -19
in high-growth industry
R&D capabilities
Ch 5 -20
Types of Strategies
Concentric Diversification
Diversification Strategies
Ch 5 -21
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
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
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
Differentiation Strategies
Ch 5 -29
Ch 5 -30
price-sensitive buyers
Buyers
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
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,
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
Ch 6 -1
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
Ch 6 -5
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
Ch 6 -8
Match between organizations internal resources & skills and the opportunities & risks created by its external factors
Ch 6 -9
SWOT Matrix
Four Types of Strategies
SO Strategies
Strengths Weaknesses Opportunities Threats SWOT
SO Strategies
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
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
Ch 6 -19
Ch 6 -20
Ch 6 -21
SPACE Factors
Internal Strategic Position External Strategic Position
SPACE Factors
Internal Strategic Position External Strategic Position
Ch 6 -23
3.
Compute an average score for each FS, CA, ES, and IS.
Ch 6 -24
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
Ch 6 -27
Ch 6 -28
Ch 6 -29
Ch 6 -30
Ch 6 -33
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
Ch 6 -37
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
Quadrant III Retrenchment Concentric diversification Horizontal diversification Conglomerate diversification Liquidation
1. 2. 3. 4.
Excellent strategic position Concentration on current markets/products Take risks aggressively when necessary
Ch 6 -39
Evaluate present approach How to improve competitiveness Rapid market growth requires intensive strategy
Ch 6 -40
Compete in slow-growth industries Weak competitive position Drastic changes quickly Cost & asset reduction (retrenchment)
Ch 6 -41
Strong competitive position Slow-growth industry Diversification to more promising growth areas
Ch 6 -42
Ch 6 -43
QSPM
Quantitative Strategic Planning Matrix
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
Ch 6 -46
Ch 6 -47
Weight
Opportunities
1.population
AS 2 4 4 -
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
4 4 2 -
3 1 4 -
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
0.14
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
4 1 1 3 2
1 4 4 4 4
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
Ch 7-1
Ch 7-2
Shift in responsibility
Division or Functional Managers
Strategists
Ch 7-3
Management Issues
Annual Objectives Policies Resources Organizational Structure Restructuring Rewards/Incentives
Management Issues
Ch 7-4
Management Issues
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)
Ch 7-6
Ch 7-7
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
Ch 7-8
Functional Structure Divisional Structure Strategic Business Unit Structure (SBU) Matrix Structure
Instructor: Ker Channarin Ch 7-9
Ch 7-10
Ch 7-11
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
Ch 7-14
Reengineering
Reconfiguring or redesigning work, job, and process to improve cost, quality, service and speed. Process management Process innovation Process redesign
Ch 7-15
Ch 7-16
Resistance to Change
-- Single greatest threat to successful strategy implementation -- Raises anxiety; fear concerning Economic loss Inconvenience Uncertainty Break in status-quo
Ch 7-18
Change Strategies
Force Change Strategy Educative Change Strategy Rational or Self-Interest Change Strategy
Ch 7-19
mend rather than harm the environment Develop/acquire green business Divesting environmental-damaging business
Ch 7-20
Ch 7-21
Management Issues
Production/Operations Concerns
Production processes typically constitute more than 70% of firms total assets
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
Ch 7-25
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
Ch 8-1
Ch 8-2
Ch 8-3
Ch 8-4
Marketing Issues
of strategy implementation
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
Ch 8-6
Marketing Issues
Centrally important to Implementation
Ch 8-7
Marketing Issues
Market Segmentation
Ch 8-8
Marketing Issues
Market Segmentation Directly affect marketing mix variables: Product Place Promotion Price
Ch 8-10
Ch 8-11
Marketing Issues
Geographic
Demographic
Psychographic
Behavioral
Ch 8-12
Age Family size Family life cycle Income/occupation Education Religion Race/nationality
Ch 8-13
Ch 8-14
Marketing Issues
Behavioral Use occasion Benefits sought User status Usage rate Loyalty status Readiness stage Attitude toward product
Ch 8-15
Ch 8-16
Marketing Issues
Customer Wants
Product Positioning
Customer Needs
Ch 8-17
2. Diagram Map 3. Plot Competitors Products 4. Look for Niches 5. Develop Marketing Plan
Instructor: Ker Channarin Ch 8-18
Product-Positioning Steps
Ch 8-19
Finance/Accounting Issues
Ch 8-20
Finance/Accounting Issues
Essential for Implementation Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating worth of a business
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
Ch 8-22
Finance/Accounting Issues
Capital Acquisition to Implement Strategies
Debt Equity
Ch 8-23
Finance/Accounting Issues
Debt vs. Equity Decisions
EPS/EBIT analysis
and taxes
Ch 8-24
Finance/Accounting Issues
Projected Financial Statements
Allow an organization to examine the expected
Ch 8-25
Finance/Accounting Issues
Steps in Preparing Projected Financial Statements
1. Prepare income statement before balance
Ch 8-26
Finance/Accounting Issues
Steps in Preparing Projected Financial Statements (contd)
4. Subtract dividends to be paid from net income and
Ch 8-27
Ch 8-28
Finance/Accounting Issues
Financial Budget Details how funds will be obtained and spent for a specified period of time
Ch 8-29
Finance/Accounting Issues
Types of Budgets Cash budgets Operating budgets Sales budgets Profit budgets Factory budgets Expense budgets
Ch 8-30
Finance/Accounting Issues
Evaluating Worth of a Business
integrative, intensive, and diversification strategies often implemented through acquisitions of other firms
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
Ch 8-32
Ch 8-33
Constraints Level of support constrained by resource availability Technological improvements shorten product life cycles
Ch 8-34
products 2. Innovative imitator of successful products 3. Low-cost producer of similar but less expensive products
Ch 8-35
Information is the basis for understanding the firm. Its one of the most important factors differentiating successful from unsuccessful firms.
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
Ch 8-37
Ch 9-1
Strategies become obsolete Internal environments are dynamic External environments are dynamic
Ch 9-2
strategy. 2. Compare expected to actual results. 3. Identify corrective actions to ensure that performance conforms to plans.
Ch 9-3
Ch 9-4
Have assets increased? Increase in profitability? Increase in sales? Increase in productivity? Profit margins, ROI, and EPS ratios increased?
Ch 9-5
Rumelts 4 Criteria
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
Ch 9-9
Ch 9-10
Ch 9-11
Ch 9-12
Ch 9-13
Ch 9-14
Evaluation Framework
I. Review Underlying Bases Yes
Differences?
NO
Differences?
NO
Continue present course
Yes
Ch 9-15
Ch 9-16
Financial Ratios
Compare performance over different periods Compare performance to competitors Compare performance to industry averages
Ch 9-17
Ch 9-19
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
1. 2. 3. 4.
Financial performance Customer knowledge Internal business processes Learning & growth
Ch 9-22
Ch 9-23
Ch 9-24