THE STRATEGIC
MANAGEMENT PROCESS
[or How to Analyze a Case]
Dr. Laura Whitcomb
Mgmt 497
Strategic Management
Definition
= The process whereby managers establish an
organization’s long-term direction. This involves:
1) Setting Mission & Goals
2) Strategy Formation
--internal capabilities
--external environment
--selection of strategy
3) Strategy Implementation
4) Strategy Evaluation
How to Analyze a Case
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Mission/Vision & Objectives
Current Strategy
Industry Analysis
S.W.O.T. Analysis
Recommendations
MISSION Defined
Answers the question “What business are
we in?” or “Why do we exist?”
--Customer Needs: What is being satisfied?
--Customer Groups: Who is being satisfied?
--Distinctive Competencies: How are
customer needs being satisfied?
Pepsico vs. Coke?
• To be the world's
premier consumer
products company
focused on
convenient foods and
beverages.
• To Refresh the
World...in body, mind,
and spirit.
• To Inspire Moments of
Optimism... through
our brands and our
actions.
• To Create Value and
Make a Difference...
everywhere we
engage.
Vision Statements
• Future-oriented; transformative
• Mission = what is; vision = what will be
• Companies may have mission or vision or
both
• Mission and/or vision often accompanied
by statement of company values
GOALS
= a desired future state that a company
attempts to realize.
Should be:
- precise & measurable
- addressing important issues
- challenging but realistic
- set for a specific time period
- consistent with each other
Types of Goals
• Financial
– Profitability
– Revenue growth
– Long-term shareholder value
• Customer
– Product/service attributes; relationship; image
• Internal Process
– Operations, customers, innovation
– Corporate social responsibility
• Learning & growth
– Human, information, & organization resources
Levels of Strategy &
Organization Structure
• Corporate Strategy
------>Corporate Head Office
• Business Strategy
------>Business Divisions
• Functional Strategy
------>R&D, HR, Finance, Operations,
Marketing/Sales
Corporate Strategy
Generic Alternatives/Grand Strategies
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Stability
Expansion
Retrenchment
Combination
Expansion/Retrenchment
Generic Choices
• How?
– Internal
– External
– Alliances
• What?
– Vertical integration
– Horizontal integration
– Diversification: related/unrelated
Nestle’s Corporate Strategy
• 2001 Acquired Purina pet food
• 2002/5 Acquired Dreyer’s Ice Cream
• 2006 Acquired Novartis nutrition business & Jenny Craig
diet products
• 2007 Acquired Gerber baby foods
Porter’s Generic Competitive
Strategies
Purpose: achieve above-average long-run
ROI for your industry.
• Competitive Advantage
– Cost Leadership
– Differentiation
• Competitive Scope
– Broad Target
– Narrow Target (Focus/Niche)
Porter’s Generic Competitive
Strategies
Competitive
Advantage/
Scope
Lower Cost
Differentiation
Broad Target
Cost
Leadership
Differentiation
Narrow Target
Cost Focus
Focused
Differentiation
Tesla Goals & Strategy (summer 2007)
Auto co. based in Silicon Valley
• Begin producing $98,000 electric sports car in
Oct. 2007
• Tesla engineers focus on the battery, computer
software, & proprietary motor; outsource the rest
– Uses lithium ion batteries, used in laptops, vs. nickel
metal hydride
– Development center in Detroit, with engineers hired
away from Big 3
• Future: Sedan called White Star, $55-68,000; in
5 years, Blue Star, $30,000
Corporate Culture
= Collection of beliefs, expectations, and
values learned and shared by members
and transmitted from one generation of
employees to another.
= Collective mental programming.
Functions of Corporate Culture
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Conveys a sense of identity
Generates employee commitment
Adds to organizational stability
Serves as a frame of reference
Industry Analysis:
Porter’s 5 Competitive Forces
Purpose: understand why some industries have
higher profit margins & what factors can change
long-run industry profitability.
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Risk of New Entry
Rivalry Among Established Firms
Bargaining Power of Buyers
Bargaining Power of Suppliers
Threat of Substitute Products
ENTRY
Barriers
• Brand Loyalty
• Absolute Cost Advantages
– patents
– access to raw materials
– superior production techniques
• Economies of Scale
• Government Regulation
Factors Affecting Intensity of
RIVALRY
• Competitive Structure
– number of firms
– relative market share
• Demand conditions
– growth
– decline
• Exit barriers
Factors Affecting BARGAINING
POWER
• Number of firms in buyer vs. supplier
industries
• Quantity or % of total orders
• Switching costs
• Standardization vs. specialization of input
• Threat of vertical integration
SUBSTITUTES
= products from OTHER industries that
serve consumers’ needs in a way that is
similar to those being served by your
industry.
Example: coffee vs. tea vs. soft drinks
NOTE: Substitutes are very difficult to
monitor, because they can involve
technological changes in industries that
did not pose any threat in the past.
Company Situation Analysis
• INTERNAL: Strengths & Weaknesses
– financial position: relative & changes over
time
– functional capabilities: sustainable?
distinctive?
• EXTERNAL: Opportunities & Threats
– demographic & socio-cultural changes
– economic & political/legal changes
– industry & technological changes
RECOMMENDATIONS
Shift from Analysis--->Synthesis
• Is a fundamental shift in strategy required
or not?
• How do your recommendations line up
with your SWOT analysis?
• Is this a feasible, creative solution that is
supported by your analysis?