Strategic
Management
Strategic Planning Process
1.
2.
3.
4.
5.
Identify Mission and Objectives
Analyze Internal and External Environment
Formulate Strategy
Implement Strategy
Evaluate Results and Control
Figure 9.1: Strategy formulation and implementation
in the strategic management process.
3
2. Analyze Internal and External Environment
 The SWOT Analysis provides information that is
helpful in matching the firm’s resources and
capabilities to the competitive environment
 Identifies:
Strengths
Weaknesses
Opportunities
Threats
SWOT
Strengths
 Resources and capabilities that can be used as a basis
for developing its competitive advantage
 Examples:
 Manufacturing efficiency
 Skilled workforce
 Superior reputation among customers
 Good market share
 Strong financing
 Patents
 Strong brand names
 Favourable access to distribution networks
 Exclusive access to high grade natural resources
SWOT
Weaknesses
 The absence of certain strengths may be viewed as a
weakness
 Examples:
 Lack of patent protection
 Weak brand name
 Inexperienced staff
 Limited storage space
 Outdated facilities
 Obsolete technologies
 May be the flip side of a Strength
SWOT
Opportunities
 The external environment analysis may reveal certain
new opportunities for profit and growth.
Examples:
 An unfulfilled customer need
 Arrival of new technologies
 Loosening of regulatuions
 Removal of international trade barriers
 Weak market rivals
 Growing geographical area
SWOT
Threats
 Changes in the external environment also present
threats to firms
Example:
 Shifts in consumer tastes
 Emergence of substitute products
 New competitors
 Increased trade barriers
 Economical/World issues
 New regulations
SWOT Matrix
 A competitive advantage can be developed by :
o Finding a fit between a business’ strengths and
upcoming opportunities
o Using their strengths to create strategies that take
advantage of these opportunities and minimize threats
SWOT Matrix
S-O Strategies
 Pursue opportunities that are a good fit with company’s strengths
W-O Strategies
Overcome weaknesses to pursue opportunities
S-T Strategies
 Identify ways that the company can use its strengths to reduce its
vulnerability to external threats
W-T Strategies
Establish a defensive plan to prevent the firm’s weaknesses from
making it highly susceptible to external threats
Personal SWOT Analysis - Example
For Career Planning
 Complete table
Internal
Your Strengths
Your Weaknesses
External
Opportunities in your
career field
Threats in your career field
 Answer the following questions
 How can you capitalize on your strengths and pursue opportunities?
 How can you overcome your weaknesses to be able to pursue
opportunities?
 Identify ways that you can use your strengths to reduce vulnerability to
external threats?
 What can you do to prevent your weaknesses from making you
susceptible to external threats?
PEST Analysis - Link
 is a tool to examine the external factors that provide
opportunities and threats to an organization that are beyond
the organization’s control.
PEST Analysis
 Political factors include: political stability, trade regulations,
taxation, labour laws, and safety regulations. These factors
vary widely from country to country.
 Economic factors include: economic growth, stagnation,
recession, interest rates, exchange rates, and inflation.
 Social factors include: demographics and cultural aspects,
e.g., health consciousness, population growth, age
distribution, education, and attitudes to work and leisure.
 Technological factors include: new discoveries and
developments, rates of technological obsolescence, changes
in information technology, and research and development
activity.
PEST Analysis is useful for four
main reasons:
It helps you to spot business or personal opportunities, and
it gives you advanced warning of significant threats.
2. It reveals the direction of change within your business
environment. This helps you shape what you're doing, so
that you work with change, rather than against it.
3. It helps you avoid starting projects that are likely to fail, for
reasons beyond your control.
4. It can help you break free of unconscious assumptions
when you enter a new country, region, or market; because
it helps you develop an objective view of this new
environment.
1.
Figure 9.4 Porter’s model of five strategic
forces affecting industry competition. LINK
Source: Developed from Michael E. Porter, Competitive Strategy (New York: Free Press,
1980).VIDEO
16
Porter's Five Forces
 Porter’s model develops strategies to meet opportunities and threats in
the organization’s external environment.
 Five competitive forces that shape every industry and every market.
 Competitors are the existing competitive rivalry within the industry.
 New entrants involve the threat from new market entrants.
 Customers mean the bargaining power of buyers.
 Suppliers are the bargaining power of suppliers.
 Substitutes are the threat of substitute products which includes
technology change
Types of strategic plans
 Growth Strategy
 involves expanding current operations.
 Concentration - expanding in the same industry,
 e.g., Tim Horton’s opens more stores, all of them selling the same
products.
 Vertical integration which means expansion by buying suppliers
or distributors,
 e.g., a meat processing company buying farms (suppliers) or
grocery stores (distributors).
 Diversification which means buying or starting businesses in
other industries.
 Rogers Communications Inc. is an example of a diversified
Canadian corporation.
Types of strategic plans
 Retrenchment Strategy
 used when an organization is in crisis.
 It seeks to correct weaknesses by making
changes to current business practices.
 Restructuring and downsizing are two
commonly used terms for retrenchment
strategies.
Types of strategic plans
 e-business Strategy
 the use of the Internet to become more successful.
 Businesses can use Internet technology to buy
materials from their suppliers and to sell products to
their customers.
 Even businesses who don’t sell goods or services
online will use the Internet for advertising, collecting
information, and distributing information.
3. Strategy Formulation
Where are the major opportunities for
achieving sustainable competitive
advantage?
1. Cost and Quality
2. Knowledge (innovation) and Speed
3. Barriers to Entry
4. Financial resources
3. Strategy Formulation
1. Differentiation – make
our products appear
different from
competitors
2. Cost Leadership –
minimize costs to
operate more efficiently
than the competition.
3. Focused
Differentiation concentrate on one
special market segment
to offer a unique product
4. Focused low cost –
concentrate on one
special market segment
and be the provider with
the lowest cost
4. Strategy Implementation
 Involves organization of the firms
resources and motivation of the staff
to achieve objectives
 Care must be taken to communicate
the strategy and reasoning behind it
5. Evaluation and Control
1. Define parameters to be measured
2. Define target values for those parameters
3. Perform measurements
4. Compare measured results to the pre-
defined standard
5. Make necessary changes
Critical tasks of Strategic Leadership
 Be a guardian of tradeoffs
 Create a sense of urgency
 Ensure that everyone understands the strategy
 Be a teacher
 Be a great communicator
Case Studies
 Read the case study assigned to your group. As a group,
discuss the answers to the questions included at the end of
each case.
 Decide on a format to present the results of your work to
your teacher and peers.
 website, a slideshow presentation, or a video.
 The presentation must present a brief introduction to the
business and its situation, as well as answers to the questions.
Be sure to use the concepts and terms you studied.