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A Strategic Framework
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What is a framework ?
A hypothetical description of a complex entity orprocess
A structure supporting or containing something
A basic conceptual structure
In software: A set of software (compile/run-timeelements, libraries, tools, services),
documentation, policies, procedures, thatsupports the implementation of technologyspecific higher level software elements.
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What are the components of astrategic framework?
A vision for the future
A mission statement that defines what the organisationdoes
A statement about the current position of the
organisation and how its progress towards its goals andobjectives will be measured
A means of generating and selecting the strategies toachieve those goals
Implementation of the processes to achieve thestrategies
A control mechanism to monitor and get feedback fromimplemented processes
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Strategic framework
Develop Mission& Vision
Statements
Internal &External Audits
Set Long termobjectives &
Goals
Generate ,Evaluate & Select
Strategies
Implement
Strategies
Measure andevaluate Progress
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Vision and Mission statements
Vision statement: A statement that captures thelong-term picture of what the organization wantsto become
A mission statement defines in a paragraph orso any entity's reason for existence. It embodiesits philosophies, goals, ambitions and mores.Any entity that attempts to operate without a
mission statement runs the risk of wanderingthrough the world without having the ability toverify that it is on its intended course.
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Sample vision statements
"Our vision is to be earth's most customercentric company; to build a place wherepeople can come to find and discover
anything they might want to buy online."Amazon.com
To organize the world's information and
make it universally accessible and useful
- Google
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Sample mission statements
"To build a place where people can cometo find and discover anything they mightwant to buy online" Amazon
To promote openness, innovation, andopportunity on the web - Mozilla
Nasa:
To improve life here, To extend life to there,
To find life beyond.
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Internal and external audits
Internal
RBV
Core Competencies
Value Chain
External
5 Forces
Competitor Analysis
EFE Matrix
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Internal Audit
Look at Internal
strengths/weaknesses
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RBV- resource based view
Internal resources are more important thanexternal factors. They are the basis forcompetitive advantage.
Identify all key resources
Evaluate resources
Protect the resources you identify as high value.
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Core Competencies
What a firm does that is strategicallyvaluable They are
Valuable
Rare
Costly to imitate
Non substitutable
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Value Chain
A value chain describes the categories ofactivities within and around an
organisation, which together create a
product or service.
The goal of these activities is to create value
that exceeds the cost of providing theproduct or service, generating a profitmargin.
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Purpose of External Audit
Identify
Opportunities
Threats
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Porters Five Forces
Five-Forces Analysis is a framework foranalyzing a particular industry.
Yet, the five forces affect all the otherbusinesses in that industry.
Five forces do not determine whether aspecific firm can be successful
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Porters Five Forces
Threat of
Substitute
Products
Threat ofNew
Entrants
Threat of
New
Entrants
Rivalry Among
Competing Firms
in Industry
Bargaining
Power of
Buyers
Bargaining
Power of
Suppliers
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Competitor Analysis
An assessment of the strengths andweaknesses of current and potentialcompetitors.
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External Factor EvaluationMatrix (EFE Matrix)
Tool to visualize and prioritize theopportunities and threats that a businessis facing
External factors assessed in the EFEmatrix are the ones that are subjected tothe will of social, economic, political, legal,
and other external forces
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EFE Process
List factors
Divide factors into two groups:opportunities and threats.
Assign Weights
Rate Factors
Multiple weights by ratings Total all weighted scores
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EFE example
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Establishing Long Term Objectives
Quantifiable
Measurable
Realistic Understandable
Challenging
Hierarchical Obtainable
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Performance Measures byorganisational level
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Competitive strategies
Generic strategies were used initially inthe early 1980s, and seem to be evenmore popular today. They outline the three
main strategic options open toorganization that wish to achieve asustainable competitive advantage.
Cost Leadership
Differentiation
Focus or Niche strategy
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Cost leadership
A type of competitive strategy with which theorganization aggressively seeks, efficient
facilities, cut cost, and employs tight cost control
to be more Efficient than competitors. The low cost leader in any market gains
competitive advantage from being able to manyto produce at the lowest cost.
Low cost mean company can undercutcompetitors.
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Differentiation
A type of competitive strategy with which theorganization seek to distinguish its product
or services from competitors.
The organization may use advertising, distinctiveproduct features exceptional service or newtechnology to achieve a product perceived asunique.
This strategy may be profitable becausecustomer will pay high price for the product.
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Focus
The type of competitive strategy thatemphasizes concentration on a specific
regional market or buyer group.
The premises is that the need of a groupcan be better serviced by focusing entirelyon it.
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Generate & Evaluate Strategies
BCG matrix
PESTLE
SWOT
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BCG growth matrix
A concept developed by the BostonConsulting Group that evaluates SBUs
with respect to the dimension of business
growth rate and market share
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BCG growth matrix
Cash Cow Star
Dog Problem Child
Market Share
High
Low
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BCG matrix
Dogs. These are products with a low share of alow growth market. These are the canine versionof 'real turkeys!'. They do not generate cash for
the company, they tend to absorb it. Get rid ofthese products.
Cash Cows. These are products with a highshare of a low growth market. Cash Cows
generate more than is invested in them. So keepthem in your portfolio of products for the timebeing.
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BCG matrix
Problem Children. These are products with alow share of a high growth market. Theyconsume resources and generate little in return.
They absorb most money as you attempt toincrease market share.
Stars. These are products that are in highgrowth markets with a relatively high share of
that market. Stars tend to generate highamounts of income. Keep and build your stars.
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PESTLE
PESTLE analysis - an audit of anorganisation's environmental influences
Purpose of using this information to guidestrategic decision-making.
If the organisation is able to audit its currentenvironment and assess potential
changes, it will be better placed than itscompetitors to respond to changes.
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PESTLE
PESTLE stands for
Political
Economic
Sociological
Technological
Legal
Environmental
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SWOT Analysis
A method of studying organizational resources andcapabilities to assess the firms strengths and
weaknesses and scanning its external environment toidentify opportunities and threats.
Provides you with a critical view of the internal andexternal environment
Helps you evaluate your ability to accomplish yourmission.
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SWOT matrix
Strengths
Weaknesses
Opportunities
Threats
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Strategy Implementation
Action stage (put formulate strategy intoaction)
Establish annual objectives
Devise policies
Motivate employees
Redirecting marketing efforts Prepare budgets
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Formulation vs implementation
Formulation focuses on effectiveness
Implementation focuses on efficiency
Shift in responsibilities from strategists todivisional or functional managers
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Management Issues
Annual objectives
Policies
Resources Organizational Structure
Restructuring
Rewards/Incentives
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Management Issues
Resistance to change
Natural environment
Supportive culture Production/ operations
Human resources
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The nature of strategyimplementation
Strategy implementation means change
Less than 10% of strategies formulated aresuccessfully implemented!
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Strategy Implementation Failure
Failing to segment markets appropriately
Paying too much for a new acquisition
Falling behind competition in R&D Not recognizing benefit of computers in
managing information
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Successful StrategyImplementation
Market goods & services well
Raise needed working capital
Produce technologically sound goods Sound information systems
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Strategy review and evaluation
Strategies become obsolete
Internal environments are dynamic
External environments are dynamic
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Strategy Evaluation
Vital to the organizations well-being
Alert management to potential/actualproblems in a timely fashion
Erroneous strategic decisions can havesevere negative impact on organizations
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Three basic activities in strategicreview
1. Examine the underlying bases of afirms strategy.
2. Compare expected to actual results.
3. Identify corrective actions to ensure thatperformance conforms to plans.
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Difficulties in Strategy Evaluation
1. Increase in environments complexity
2. Difficulty predicting future with accuracy
3. Increasing number of variables4. Rate of obsolescence of plans
5. Domestic and global events
6. Decreasing time span for planningcertainty
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Strategy Evaluation Should
Initiate managerial questioning
Trigger review of objectives & values
Stimulate creativity in generatingalternatives
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The product life cycle
The Product Life Cycle (PLC) is basedupon the biological life cycle. For example,a seed is planted (introduction); it begins
to sprout (growth); it shoots out leavesand puts down roots as it becomes anadult (maturity); after a long period as an
adult the plant begins to shrink and die out(decline).
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Product Life Cycle
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Introduction Stage
In Introduction stage, sales are low as a newidea is first introduced to a market.
Customers aren't looking for the product, andmay not be aware of its benefits or advantages
over current offerings. In fact, they may not even know about it. Informative promotion is needed to tell potential
customers about the new product concept. Even
though a firm promotes its new product, it takestime for customers to learn that the product isavailable. Money is invested in developing themarket in anticipation of future profits.
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The Growth Stage
The Growth stage, industry sales grow quickly -but industry profits rise and then start falling.
The innovator begins to make big profits asmore and more customers buy.
But competitors see the opportunity and enterthe market.
Some just copy the most successful product, ortry to improve it to compete better. Others try to
refine their offerings to do a better job ofappealing to some target markets. The newentries result in much product variety.
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Maturity Stage
Maturity occurs when industry sales level off.
Competition gets tougher as aggressive competitorshave entered the race for profits.
Industry profits continue to go down during maturity
because promotion costs rise and competitors continueto cut prices to attract more business. New firms may stillenter the market during this stage. These late entriesskip the early life cycle stages, including the profitablegrowth stage. They must try to take market share from
established firms, which is difficult and expensive in asaturated, flat market. Customers who are satisfied withtheir current relationship won't be interested in switchingto an unknown brand.
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Decline Stage
During the Sales Decline stage, new productsreplace the old.
Price competition from dying products becomes
more vigorous, but firms with strong brands maymake profits until the end because theysuccessfully differentiated their products. Theymay also keep some sales by appealing to the
most loyal customers or those who are slow totry new ideas. These buyers might switch later,smoothing the sales decline.
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Continuous assessment 1
Due 03/11/10
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CA 1 group assignments
Compare and contrast the strategies of two competing IT companies(a list is provided below) reviewing in particular their previous 5 to 10years of business.
The report should provide a critical review of what the companiesset out to achieve and what they actually achieved.
Support your observations with correctly referenced sources andpropose the future trajectory of each company providingrecommendations on how they should proceed for the next 5 years.
Your report should be written in the style of an external consultantasked by an investor for advice on which of the two companies toinvest in.
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Group assignment
10 Slides 15 minutes & Questions
Write a 5,000 Word Report
Submit via Webcourses only
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Group assignment
1. Google vs Microsoft
2. Apple vs Nokia
3. HP vs Dell
4. Microsoft vs Mozilla
5. VMWare vs Citrix
6. Google vs Facebook
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Paper to review
Paper 1What is Strategy Porter, 1996
Read for next class!
Available on website