Strategic Management
Strategy Formulation and Implementation
assessing your situation today and predicting the future; setting objectives ; crafting courses of action to get you from where you are today to where you want to be tomorrow. strategic planning requires looking far ahead and using insight and creativity to make sense of a great many imponderables.
The Strategic Management Process
the continuous process of identifying and pursuing the organization's mission by aligning internal capabilities with the external demands of the environment.
Step 1: Define the business and its mission
Step 2: Translate the mission into strategic goals
Step 3: Formulate a strategy to achieve the strategic goals
Step 4: Implement the strategy
Step 5: Evaluate performance
Characteristics of Strategy Makers
Defenders: pursue concentrator/specialization strategies; their main aim seems to be “to become the best at producing and marketing one specialized product or service”.
Prospectors: un companies that are continually searching for new market opportunities and experimenting with new products and services.
Analyzers: unwilling to let new products overshadow their desire to maintain stable and efficient operations for their traditional products and services.
Reactors:run the most cautious companies of all. Top managers in these companies tend to pursue “status quo” strategies. continue to do business as usual even when the market for their goods undergoes profound changes
Levels and Types of Strategies
Corporate (or executive) Level Strategy:the responsibility of top management mostly concerned with effectiveness.
Business (or tactical) Level Strategy: the responsibility of divisional (that is, middle level) managers concerned with "a mix" of effectiveness and efficiency.
Functional (or operational) Level Strategy; the responsibility of functional (that is, lower level) managers mostly concerned with efficiency.
A single business or concentration strategy
the company focuses on one product or product line, usually in one market.//The main advantage of a concentration strategy is that the company can focus on the one business it knows well, allowing it to do that one thing better than its competitors.//The main disadvantage here is the risk inherent in putting all one’s eggs into one basket. Concentrators must always be on the lookout for signs of decline.
Four strategies can contribute to growth
Single-business companies
market penetration:taking steps to boost sales of present products by more aggressively selling and marketing into the firm’s current markets.
Geographic expansion: concentrating on its traditional business by aggressively expanding into new geographic markets, domestic and overseas.
product development:developing improved products for current markets.
Horizontal integration:acquiring ownership or control of competitors in the same or similar markets with the same or similar products
Vertical integration:owning or controlling the inputs to the firm’s processes and/or the channels through which products or services are distributed.
Diversification:a strategy of expanding into related or unrelated products or market segments. related diversification+conglomerate diversification
stability strategythe organization is satisfied with its rate of growth and product scope.
Investment reduction: retrenchment by reducing operations +divestment by selling individual businesses
Strategic alliances and joint ventures promote growth through partnering with others.
Diversification calls for the acquiring or developing of other businesses
Related diversification: Offers more opportunity for synergy+competitive advantage+utilization of existing management expertise+cost minimization; economies of scale+ less diversify risk+less available market opportunities.
Unrelated diversification:
SBU (Strategic Business Unit)
Divestment
Joint Venture
Turnaround
Liquidation
The Product Life Cycle and BCG Matrix
Stages of the Product Life Cycle:
Birth / Start-Up / Introduction
Growth
Maturity
Decline
The Boston Consulting Group (BCG) matrix
Stars :high-growth industries+high market share+require large infusions输液 of cash to sustain growth+have such a strong market position that much of the needed cash can be generated from sales and profits.
Question marks:high-growth industries+low market share+ either divert cash from its other businesses to boost the question mark’s market share +or get out of the business
Cash cows:low-growth industries+high relative market share+good cash generators for question mark businesses and stars business
Dogs :low-market-share businesses+low-growth, unattractive industries, dogs can quickly become "cash traps," absorbing cash to support a hopeless and unattractive situation.
How to use the BCG Matrix
Cash Cow -- 'Milk it' use resources to support a star
Star -- 'Feed it' resources, so that it will grow into a big, fat cash cow
Dog -- "Its days are over;" cut off resources or divest
Question Mark -- Management 'judgment call;' should it be fed, hoping for a star?
The GE (General Electric) Matrix is quite similar, but adds more precision and detail by using a 3x3 matrix.
The concept of the BCG Growth/Share Matrix is "related" to the concept of the Product Life Cycle.
Organizational Purpose and Strategy
Defining an Organization's Purpose
Creating and Implementing a Strategy
Mission Statement Characteristics: short, clear and easy to understand.
Creating a Strategy: Types of Strategies
Growth strategy: means increasing the level of the organization's operations. Typical measures of growth would be expanding revenues, adding employees, and increasing market share. // Popular means for achieving growth include aggressive direct expansion, development of new products or services, mergers and acquisitions, joint ventures and expansion into global markets.
Stability strategy: characterized by an absence of significant change. for environmental reasons. A highly profitable niche produces little competition, so management has little interest in changing the status
Retrenchment strategy: downsizing, along with divestitures and liquidation, are examples of retrenchment. reduces the size or diversity of its operations.
Combination strategy: simultaneous pursuit of two or more of the preceding strategies. This option recognizes that units of large organizations are often going in different directions.
SWOT Analysis
the essence of any strategy-planning effort is referred to as SWOT analysis to identify a niche that organization can exploit.
require managers to assess the organization;s strengths, weaknesses, opportunities and threats
an organization's environment, defines management's options: a successful strategy will be one that aligns well with the environment( identify external opportunities and threats)
choosing a niche, ----a successful analysis identifies a niche in which the organization's products or services can have some competitive advantage. opportunities in the environment overlap with organization's resources.
identify the organization's strengths and weaknesses:
what skills and abilities do the organization's employees have ?
what is organization's cash position?
has it been successful at developing new and innovative products?
how do consumers perceive the organization and the quality of its products or service ?
the steps force management to recognize that every organization is constrained by the resources and skills it has. ------the analysis of the organization's resources and strengths and weaknesses leads to identifying the organization's distinctive competence or unique skills and resources that determine the organization's competitive weapons.
a strategic framework
NO firms can successfully at an above-average level by trying to be all things to all people.
which one strategy management chooses depends on the organization's strengths and its competitors' weaknesses, management's objective should be to put its organization's strength where the competition isn't.
cost-leadership strategy-------organization must be the cost leader and not merely a contender for that position.the product/service offered must be perceived as comparable to that rivals. a firm gains such a cost advantage through efficiency of operations, economies of scale, technological innivations, low-cost labor, or preferential access to raw materials.
pursuing a cost leadership strategy requires a tricky balance between pursuing lower costs and maintaining acceptable quality.
differentiation strategy------the list of attributes by which an organization can differentiate itself would include high-quality, speed, state-of the art design, technological capability, expert advice. the key attribute chosen must be different from those offered by rivals and significant enough to justify a price premium that exceeds the cost of differentiating. volve stresses safety, mercedes-benz emphasizes quality.
focus strategy------the first two strategies sought a competitive advantage in a "broad" range of industry segments. the focus strategy aims at a cost advantage(cost focus) or differentiation advantage(differentiation focus) in a "narrow" segment. ---------the basic question in choosing whether to pursue a focus competitive strategy is this : by focusing on a narrow market, can we provide our target customers with a product or service better or more cheaply than our generalist competitors?--------- management selects a segment or group of segments in an industry(such as product variety, type of end buyer, distribution channel, or geographical location of buyers) and tailors the strategy to serve them to the exclusion of others.-----the goal is to exploit narrow segment of a market. feasibility depends on the size of a segment and whether it can support the additional cost of focusing.
characteristics of successful strategy implementation
7-S model summarize check list for successful strategy implementation
strategy needs to reflect an accurate assessment of the environment, particularly the current and future actions of rivals.
superordinate goal translate the strategy into overarching goals that unite the organization in some common purpose, synonymous with mission statement
skills refer to the organization's core competencies, what does the organization do best?
structure is determined by strategy, it is a vehicle to help to achieve organization goals.
system also need to align with and support, the strategy chosen including all formal policies and procedures such as capital budgeting, accounting, and information systems.
style of top management acts a role model\
staff, its is people who executive a strategy;/
the importance of sustaining a competitive advantage
long-term success of ant strategy requires a sustainable competitive advantage resistant to erosion by the actions of competitors or by changes in the industry.
a) technology changes, as do tastes of customers
b) advantages can be limited by competitors
c) management needs to create barriers that make imitation difficult or that reduce competitive opportunities.
1) the use of patents and copyrights reduces opportunities for imitation
2) when there are strong economies of scale, reducing price to gain volume is a useful tactic.
3) tying up suppliers with exclusive contracts limits their ability to supply rivals.
4) encouraging government policies that impose import tariffs can limit foreign competition
summary
5 steps in the strategy management proces: 1) define the business and deveop a mission; 2) translate the mission into strategic objectives 3)formulate a strategy to achieve the strategy objectives 4)implement the strategy 5) evaluate performance and initiate corrective adjustment as required
strategy planning : the corporate-level strategy---identifies the portfolio of businesses that in total will comprise the corporation and the ways in which these businesses will relate; the competitive strategy ----identifies how to build and strengthen the business's long-term competitive position in the marketplace;functional strategies-----identify the basic courses of action that each department will pursue to contribute to the attainment of its goals.
Generic corporate strategies include : concentration, market penetration, geographic expansion, product development. horizontal integration, vertical integration, and diversification, as well as status quo and retrenchment strategies.
Generic competive strategies include being a low-cost leader, differentiator, or focuser. the 5 forces model helps managers understand the five big forces of competitive pressure in an industry: threat of entry, intensity of rivaltry among existing competitors, pressure from substitute products, bargaining power of buyers, and bargaining power of sippliers.
creating strategic plans involves : identifying environmental forces+formulating a plan+creating implementation plans+useful techniques ( SWOT analysis+environmental scanning+benchmarking+protfolio analysis+scenario planning) +implementing strategy ( achieving strategic fit+leveraging the company's core competencies+effectively leading the change process)