STRATEGIC
MANAGEMENT
VISION, MISSION,
OBJECTIVES & GOALS
VISION
• Core ideology
• Envisioned future
• Specific
• Interest of shareholders
• Communicated to all
MISSION
It is an enduring statement of purpose that
distinguishes one business from other similar
firms.
Features
• Clarity
• Broad & enduring
• Identity & image
• Realistic
• Specific
• Values, beliefs & philosophies
• Expression of vision
Strategic Planning
Strategy: A process that results in an outcome, which is the basis
for organizational decisions and actions.
Strategic Thinking: determination of basic long-term goals and
objectives of an enterprise , adoption of courses of action.
Strategic planning is a process that involves the review of market
conditions; customer needs; competitive strengths and weaknesses;
sociopolitical; legal; and economic conditions; technological
developments; and the availability of resources that lead to the specific
opportunities or threats ffacing the organization
Strategic Planning involves taking information from the environment
and deciding upon an organizational mission and upon objectives,
strategies, and a strategic architecture.
Important in the highly competitive and global economy.
Uncertainty, instability and changing environment rule rather than an
exception.
Strategic Management
• Set of decisions and actions used to
implement strategies that will provide a
competitively superior fit between the
organization and its environment so as to
achieve organizational goals
Strategic Management
Managers ask such questions as...
What changes and trends are
occurring?
Who are our customers?
What products or services should we
offer?
How can we offer these products or
services most efficiently?
Purpose of Strategy
• The plan of action that
prescribes resource
allocation and other activities
for dealing with the
environment, achieving a
competitive advantage, that
help the organization attain
its goals
Strategies focus on:
● Core competencies
● Developing synergy
Three Levels of Strategy in
Organizations
Corporate-Level Strategy:
What business are we in?
Corporation
Business-Level Strategy:
How do we compete?
Textiles Unit
Chemicals Unit
Auto Parts Unit
Functional-Level Strategy:
How do we support the business-level
strategy?
Finance
R&D
Manufacturing
Marketing
Strategic Management Process
Scan External
Environment –
National,
Global
Evaluate
Current Mission,
Goals,
Strategies
Scan Internal
Environment – Core
Competence,
Synergy, Value
Creation
Identify Strategic
Factors –
Opportunities,
Threats
SWOT
Define new
Mission
Goals, Grand
Strategy
Identify Strategic
Factors –
Strengths,
Weaknesses
Formulate
Strategy –
Corporate,
Business,
Functional
Implement
Strategy via
Changes in:
Leadership
culture,
Structure, HR,
Information &
control
systems
Checklist for Analyzing
Organizational Strengths and
Management and Organization Marketing
WeaknessesHuman Resources
Management quality
Staff quality
Distribution channels
Market share
Employee experience,
education
Degree of centralization
Advertising efficiency
Union status
Organization charts
Customer satisfaction
Turnover, absenteeism
Planning, information,
control systems
Product quality
Service reputation
Work satisfaction
Grievances
Sales force turnover
Finance
Profit margin
Production
Research and Development
Basic applied research
Debt-equity ratio
Plant location
Machinery obsolescence
Inventory ratio
Purchasing system
Return on investment
Quality control
Laboratory capabilities
Research programs
New-product innovations
Credit rating
Productivity/efficiency
Technology innovations
BCG matrix
• Boston Consulting Group matrix evaluates
strategic business units with regard to the
firms growth rate and market share
• Strategic Business Units: divisions within
the organization by product or service to
establish goals and objectives that are in
harmony with the firms overall mission and
to assign responsibility for profits and
losses
Portfolio Strategy
• Mix of business
units and
product lines that
fit together in a
logical way to
provide synergy
and competitive
advantage
BCG Matrix
Five Forces Affecting Industry
Competition
•Internet reduces
barriers to entry
Potential New
Entrants
Internet blurs differences among
competitors in an industry
Threat of Substitute
Products
•Internet expands market size, but
creates new substitution threats
•Internet tends to increase the
bargaining power of suppliers
Bargaining
Power of
Buyers
Rivalry
among
Competitors
•Internet shifts greater power
to end consumers
Bargaining Power of Suppliers
The Five Forces
1. Level of Rivalry in an industry: how intense
is the current competition with competitors?
Increased competition results in lower profits.
2. Potential for entry: how easy is it for new
firms to enter the industry?
Easy entry leads to lower prices and profits.
3. Power of Suppliers: If there are only a few
suppliers of important items, supply costs rise.
4. Power of Buyers: If there are only a few, large
buyers, they can bargain down prices.
5. Substitutes: More available substitutes tend
to drive down prices and profits.
Porters value chain
•
Value chain is all the activities an organization undertakes to create
value for a customer
Primary activities:
•
–
–
–
–
–
•
Inbound Logistics - involve relationships with suppliers and include all the activities
required to receive, store, and disseminate inputs.
Operations - are all the activities required to transform inputs into outputs (products and
services).
Outbound Logistics - include all the activities required to collect, store, and distribute the
output.
Marketing and Sales - activities inform buyers about products and services, induce
buyers to purchase them, and facilitate their purchase.
Service - includes all the activities required to keep the product or service working
effectively for the buyer after it is sold and delivered.
Secondary activities are:
–
–
–
–
Procurement - is the acquisition of inputs, or resources, for the firm.
Human Resource management - consists of all activities involved in recruiting, hiring,
training, developing, compensating and (if necessary) dismissing or laying off personnel.
Technological Development - pertains to the equipment, hardware, software,
procedures and technical knowledge brought to bear in the firm's transformation of inputs
into outputs.
Infrastructure - serves the company's needs and ties its various parts together, it
consists of functions or departments such as accounting, legal, finance, planning, public
affairs, government relations, quality assurance and general management.
Competitive Edge Through
Competitive Strategies
• Differentiation = attempt to distinguish
products or services from that of
competitors
• Cost leadership = aggressively seeks
efficient facilities, pursues cost reductions,
and uses tight cost controls to produce
products more efficiently than competitors
• Focus = concentrates on a specific
regional market or buyer group
Tools for Putting
Strategy into
Action
Environment
Organization
Leadership
 Persuasion
 Motivation
 Culture/values
Strategy
Structural Design
 Organization Chart
 Teams
 Centralization
Decentralization,
 Facilities, task design
Human Resources
 Recruitment/selection
 Transfers/promotions
 Training
 Layoffs/recalls
Information and Control Systems
 Pay, reward system
 Budget allocations
 Information systems
 Rules/procedures
Performance
Number of
market segments
Business-level Strategies
Many
Low-Cost
Differentiation
Few
Focused
Low-Cost
Focused
Differentiated
Low Cost
Differentiation
Strategy
Business Strategies
–
Low-cost: gain a competitive advantage by
driving down organizational costs.
•
•
–
Differentiation: gain a competitive advantage
by making your products different from
competitors.
•
•
–
Managers manufacture at lower cost, reduce waste.
Lower costs than competition mean lower prices.
Differentiation must be valued by the customer.
Successful differentiation allows you to charge more
for a product.
Stuck in the middle: It is difficult to
simultaneously become differentiated and low
Business Strategies
• Firms also choose to serve the entire
market or focus on a few segments.
–
Focused low-cost: try to serve one segment of
the market but be the lowest cost in that
segment.
•
–
Cott Company seeks to achieve this in large retail
chains.
Focused differentiated: Firm again seeks to
focus on one market segment but is the most
differentiated in that segment.
•
BMW provides a good example.
Functional-level Strategies
• Seeks to have each department add
value to a good or service.
• Marketing, service, production all add
value to a good or service.
–
Value is added in two ways:
1. lower the operational costs of providing the
value in products.
2. add new value to the product by differentiating.
–
Functional strategies must fit with business
level strategies.
Goals for successful functional
strategies:
1. Attain superior efficiency: the measure of
outputs for a given unit of input.
2. Attain superior quality: products that reliably
do the job they were designed for.
3. Attain superior innovation: new, novel features
about the product or process.
4. Attain superior responsiveness to
customers: Know the customer needs and fill
them.