STRATEGIC MANAGEMENT - INTRO Dr Chandana Jayawardena Learning Outcomes • To achieve an understanding of concept of strategy and the concept of strategic management • To understand the concept of competitive advantage. • To understand the corporate strategy model. • To understand the characteristics of strategic position, strategic choices, strategy in action and strategic decisions. • To understand the levels of strategy namely corporate level, business level and operational level. • Key strategy words and vocabulary in strategic management. Value is defined by the receiver more than the giver! WHAT IS STRATEGY? A VISION A MISSION GOALS & OBJECTIVES PROGRAMMES A STRATEGY is a way of doing something. It is a game plan for action Strategy “Strategy is the direction and scope of an organization over the long term, which achieves an advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations”. Strategic management Strategic management is the continuous planning, monitoring, analysis and assessment of all that is necessary for an organization to meet its goals and objectives. Competitive Advantage The set of unique features of a company and its products that are perceived by the target market as significant and superior to the competition. Achieving Competitive Advantage • Achieving cost-based advantage by being the industry’s low-cost provider. • Using innovation to outcompete rivals on differentiating product features. • Focusing on a narrow niche market. • Offering customized attributes that meet specialized needs and tastes of the target customers. • Giving customers more value for their money by blending low-cost and differentiation. (Australian Institute of Business) Competitive Advantage Cost Types of Competitive Advantage Product/Service Differentiation Niche Strategies Cost Competitive Advantage Being the low-cost competitor in an industry while maintaining satisfactory profit margins. Differentiation Competitive Advantage Advantage achieved when a firm provides something that is unique and valuable to buyers beyond simply offering a lower price than the competition. Niche Competitive Advantage Advantage achieved when a firm seeks to target and effectively serve a small segment of the market. Sustainable Competitive Advantage A differential advantage that cannot be copied by the competition. Sources of Sustainable Competitive Advantage Patents Copyrights Locations Equipment Technology Organization’s Skills and Assets Customer Service Promotion Strategic Position •The strategic position is concerned with the impact on strategy of the external environment, an organizations strategic capability and the expectations and influence of stakeholders. Strategic Choices Involves the options for strategy in terms of a.) the direction in which strategy might move b.) the methods by which to achieve strategy Choosing between alternative diversification moves such as entering into new products & markets, developing a new product or acquiring an organization already active in the area. Strategic Opportunity Matrix (Also known as Ansoff’s Product Market Strategies) Present Product New Product Present Market Market Penetration Product Development New Market Market Development Diversification Strategic choices examples 1) How the organization seeks to compete at the business level. E.g. pricing and differentiation strategies and decision on how to compete or collaborate with competitors. 2) Issues of corporate level strategies concerned with scope or breadth of an organization that include diversification decisions about the portfolio of products and the spread of markets. Strategic choices examples 3) International strategy, diversification into new geographical markets. 4) Innovation choices such as being first mover into a market or simply a follower and how much to listen to customers in developing new products or services. 5) Methods by which they pursue their strategies. Grow organically by building new businesses with their own resources, or by mergers and acquisitions and/or strategic alliances with other organizations. Strategy in action • Intended Strategies: The original strategy that has been planned for execution. • Emergent strategies: Due to environmental changes companies are forced to change strategies that were intended from time to time. Eg: Pricing • Logical incremental strategies: Due to continuous changes in the business environment emergent strategies may change in an incremental manner. Characteristics of strategic decisions • Long term direction of an organization. • The scope of organizations activities. i.e. whether to concentrate on one area of activity, or should there be many activities. • Advantage for the organization over the competition. • Strategic fit with the business environment. E.g. the extent to which products and services meet clearly identified market needs. • Organizations resources and competencies. E.g. leverage on resources such as technology skills or strong brands. • Values and expectations of powerful actors in and around the organization. Expansionist Vs consolidation. Implications in strategic decisions • Complexity • Uncertainty • Operational decisions: Operational decisions are linked to strategy. Link between overall strategy & operational aspects. i. If the operational aspects are not in line with the strategy it will not succeed. ii. It is at the operational level that the real strategic advantage can be achieved. • Integration: For effectiveness of strategy, managers have to be cross functional and be aware of operational boundaries • Relationship and networks • Change Levels of Strategy •Corporate Level •Business Level •Operational Corporate Level Corporate level strategy is concerned with the overall purpose and scope of an organization and how value will be added to the different parts of i.e. business units of the organization. This include issues of geographical coverage, diversity of products & services, or business units and how resources are to be allocated between different parts of the organization. Business Level Business level strategy is about how to compete successfully in particular markets. This is about how the various businesses included in the corporate strategy should compete in their particular markets. For this reason business level strategy is sometimes known as “Competitive strategy”. A strategic business unit is a part of an organization for which there is a distinct external market for goods or services that is different from another. Operational Operational level strategies are concerned with how the component parts of an organization delivers effectively the corporate and business level strategies in terms of resources, processes and people. KEY WORDS • Vision: the future desired state of the organization. • Mission: is a general expression of the overall purpose of the organization (values and expectations of major stakeholders and concerned with the scope and boundaries of the organization) • A Goal: means a general aim in line with the mission. • An Objective: a more precise aim in line with the goal. • Strategic capability: resources and competences used by an organization to provide value to customers. E.g. unique resources and core competencies. • A Business model: descries the structure and information flow etc. • Strategic control: monitoring the extent to which strategy achieves the objectives and suggest corrective action. What we have LEARNT • To achieve an understanding of concept of strategy and the concept of strategic management • To understand the concept of competitive advantage. • To understand the corporate strategy model. • To understand the characteristics of strategic position, strategic choices, strategy in action and strategic decisions. • To understand the levels of strategy namely corporate level, business level and operational level. • Key strategy words in strategic management.
