because norm asked1 a few business basics it-390 since norm asked
TRANSCRIPT
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Because Norm asked 1
A Few Business Basics
IT-390
Since Norm asked
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Because Norm asked 2
Strategic Management
• The aim to achieve competitive advantage– Interrelated nature of business function– Cross-functional in nature– Requires Strategic formulation, implementation
& evaluation– Requires both: Intuition & analysis– Adapting to change is a key for business
survival
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Strategic Management
• According to Webster’s New World Dictionary, strategy is:
– “The science of planning and directing large scale military operations, of maneuvering forces into the most advantageous position prior to actual engagement of the enemy”
– I.E. Achieve competitive advantage.
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Strategic Management
• 3 Stages of the Strategic Management Process
– 1. Strategy Formulation– 2. Strategy Implementation– 3. Strategy Evaluation
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Strategic Management
• Deming’s Cycle
– Plan– Do– Check– Act
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Strategic Management
• 10 key External Forces
– Competitive - Technological– Economic - Government– Social - Political– Cultural - Environment– Demographic - Legal
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Competitive Analysis
• Porter’s “Five-Forces” Model of Competition
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Competitive Analysis
• Competitive Analysis
– Rivalry among competitive firms– Potential entry of new competitors– Potential development of substitute products– Bargaining powers of consumers– Bargaining power of suppliers
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Competitive Analysis
• Rivalry among competitive firms– Number of competitors– Rate of industry growth– Amount of fixed costs– Capacity– Height of exit barriers– Diversity of rivals
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Competitive Analysis
• Potential entry of new competitors– Economies of scale– Product differentiation– Capital requirements– Switching costs– Access to distribution channels– Government policy– Barriers to entry
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Competitive Analysis
• Potential development of substitute products
– Tea for coffee– Plastic vs. glass– Fountain pens for ballpoint pens– Computers replaced typewriters
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Competitive Analysis
• Bargaining power of consumers• When consumers affect an industry through their
ability to force down prices,, bargain for more services or higher quality, play competitors against each other
• Powerful if consumers purchases large portion of output - alternative suppliers are plentiful
• Rival firms may offer extended warranties or special services
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Competitive Analysis• Bargaining power of suppliers
– Powerful if:• Supplier industry is dominated by a few companies
but sells to many
• Product or service is unique or it has built up switching costs
• Substitutes are not readily available
• Purchasing industry buys only a small portion of the supplier group goods and are thus unimportant to the supplier.
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Strategic Management
• 14 Key Internal Forces– Management - Marketing– Manufacturing - R & D– Prod. Ops. - Purchasing– Distribution - Fin/Acctg– Packaging - Promotion– Emp/Mgr relations - HR Management– Vendor Relations - I.S.
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Types of Strategies
• Business strategy is sometimes termed as Competitive Strategy
– Integration Strategies– Intensive Strategies– Diversification Strategies– Defensive Strategies
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Types of Strategies
• Business Strategy should include:– The product-market in which the business is to
compete– The level of investment– The sustainable competitive advantage– The distinctive competencies or assets relied on– The objectives to guide strategic decision
making
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Types of Strategies
• Integration Strategies
– Forward Integration• Strategies dealing w/distributors or retailers
– Backward Integration• Strategies dealing with suppliers
– Horizontal Integration• Strategies dealing with competitors
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Types of Strategies
• Intensive Strategies
– Market Penetration• Existing markets, existing products/services
– Market Development• Existing product/services, new geographical area
– Product Development• Improving or modifying existing products/services
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Types of Strategies
• Diversification Strategies– Concentric Diversification
• Adding new but related products/services
– Horizontal Diversification• Adding new unrelated products/services, existing
customers
– Conglomerate Diversification• Adding new unrelated products/services
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Types of Strategies
• Defensive Strategies– Joint Venture
• Form temporary partnership or consortium
– Retrenchment• Regroups with cost and asset reductions
– Divestiture• Selling a division or part of the organization
– Liquidation• Selling all the company’s assets
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Types of Strategies
• Other strategies:– Combination– Mergers– Acquisitions– Takeover or hostile takeover– Leveraged Buyouts (LBO’s)– Regulation & other Political Activity– Executive Recruitment
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Types of Strategies
• Porter’s Generic Strategies Defined– Cost Leadership
• A strategy aimed at producing standardized products at low per-unit cost for cunsumers who are price-sensitive.
– Differentiation• A strategy aimed at producing products and services
considered unique industrywide and directed at consumers who are relatively price insensitive.
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Types of Strategies
• Porter’s Generic Strategies (cont.)
– Focus (Niche Market)
• A strategy aimed at producing products and services that fulfill the needs of small groups and customers.
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Types of Strategies
• Other Porter Strategies:– Value Chain
• Total revenues minus total costs yields value. To be profitable, total revenues must exceed total costs. A firm must try to understand the competitor’s value chain
– Competitive Advantage of Nations• Various nations differ in what they have to offer
businesses. I.e. cheap labor, natural resources, etc.
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Types of Strategies
• Bottom Line:
– Do things faster, better, cheaper than the competition