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Chapter 7(Lecture Outline and Line Art Presentation)

Strategic

ManagementPlanning for Long-Term

Success

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Copyright Houghton Mifflin Company. All rights reserved. Lecture Outline and Line Art Presentation , 7 2

Chapter Objectives

1. Define the term strategic management and explain itsrelationship to strategic planning, implementation, andcontrol.

2. Explain the concept of synergy and identify four kinds

of synergy.3. Describe Porters model of generic competitive

strategies.4. Identify and explain the major contribution the

business ecosystems model makes to strategicthinking.

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Chapter Objectives (contd)

5. Identify and discuss at least four e-business lessonsfrom the Internet revolution.

6. Identify and describe the four steps in the strategicmanagement process.

7. Explain the nature and purpose of SWOT analysis.8. Describe the three types of forecasts.

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Why All Managers Need an Understandingof Strategic Management

A strategic orientation encourages far-sightedness in managers.

Employees who think in strategic terms tend to

understand better how top managers think andwhy they make the decisions they do.

The trend toward greater teamwork andcooperation throughout the planning cycle iseroding the traditional distinction between thosewho plan and those who implement plans.

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Insert Table 7.1 here

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7/30Copyright Houghton Mifflin Company. All rights reserved. Lecture Outline and Line Art Presentation , 7 7

Strategic Management = Strategic Planning +Implementation + Control

Strategic Management The ongoing process of ensuring a competitively

superior fit between an organization and its changingenvironment.

Includes budget control, long-range planning, andstrategic planning. Merges strategic planning, implementation, and

control to create a dynamic process.

Requires every employee to consider the bigpicture. Involves strategy innovation in rethinking the basis

for competition (business model) in the industry.

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Strategy An integrated externally-oriented perception of how to

achieve the organizations mission.

Strategic Planning The process of determining how to pursue theorganizations long -term goals with resourcesexpected to be available.

Strategic Management = Strategic Planning +Implementation + Control (contd)

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Thinking Strategically

Synergy The concept that the whole is greater than the sum of

the parts.

Types of synergy Market synergy: extending products to new markets. Cost synergy: savings from combinations of common-

base operations, resources, and facilities. Technological synergy: the transfer and application of

technologies to new markets. Management synergy: complementary skills that

make for more effective overall management.

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Porters Generic

Competitive Strategies

Models Competitive Variables Competitive advantage: how to compete in a market.

Competitive scope: how broad of a market to target.

Cost Leadership Strategy Having the lowest overall cost in a market provides a

competitive advantage in pricing over competitors.

Differentiation Strategy Providing unique and superior value for the customer

that builds brand loyalty.

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Figure 7.1Porters Generic Competitive Strategies

Source: Reprinted with the permission of The Free Press, a division of Simon & Schuster from THE COMPETITIVEADVANTAGE OF NATIONS by Michael E. Porter. Copyright l990 by Michael E. Porter.

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Porters Generic

Competitive Strategies (contd)

Cost Focus Strategy Attempting to gain a competitive edge in a narrow (or

regional) market segment by controlling (competitivelydominating) the segment.

Focused Differentiation Involves achieving a competitive edge by delivering a

superior product and/or service to a limited audience.

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Business Ecosystems

Business Ecosystem An economic community of organizations and all their

stakeholders, including suppliers and customers.

Organizations need to be as good at cooperating as they are at competing if they are to succeed.

Coevolving: key organizations selectivelycooperating and competing to achieve both theirindividual and collective goals, which they couldnot achieve on their own.

Greater strategic cooperation is needed to foster thethe spread of realized innovation.

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Thinking Strategically (contd)

E-Business Strategies for the Internet The Internet changes everything but it doesnt

change everything overnight.

Some of the old rules still apply an investment shouldstill either save you money or make you money.

First, we overestimated the Internet; dontunderestimate it now its long-term impact will likelyexceed expectations.

Evolving Internet technologies are still emerging.

There is no one-size-fits-all Internet strategy.

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Thinking Strategically (contd)

Five Lessons from the Dot-com World There are still a lot of ways to make money on the

Internet.

Customer loyalty is built with reliable brand namesand sticky web sites.

Bricks and mortar must earn their keep.

Cannibalism can pay.

E-business partnering should not dilute strategiccontrol or ethical standards.

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The StrategicManagement Process

Four Steps in the Strategic ManagementProcess

1. Formulation of a grand strategy.

2. Formulation of strategic plans.

3. Implementation of strategic plans.

4. Strategic control.

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Figure 7.2The Strategic

ManagementProcess

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Formulation of a Grand Strategy

Grand Strategy A general explanation of how the organizations

mission is to be accomplished.

Situational Analysis Finding the organizations niche by performing a

SWOT ( S trengths, W eaknesses, O pportunities, andT hreats) analysis to match unfolding opportunitieswith resources being acquired.

Capability profile: identifying the organizationsstrengths and weaknesses.

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Figure 7.3Determining Strategic Direction Through Situational (SWOT) Analysis

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Formulation of a Grand Strategy (contd)

Situational Analysis (contd) Key capabilities for todays companies

Quick response to market trends.

Rapid product development. Rapid production and delivery.

Continuous cost reduction.

Continuous improvement of processes, humanresources, and products.

Greater flexibility of operations.

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Formulation of Strategic Plans

Criteria for Formulating Strategic Plans Develop clear results-oriented objectives stated in

measurable terms. Identify activities required to accomplish the objectives.

Assign specific responsibilities to the appropriatepersonnel. Estimate times to accomplish activities and their

appropriate sequencing. Determine resources required to accomplish the

activities. Communicate and coordinate the above elements and

complete the action plan.

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Strategic Implementationand Control

Implementation of Strategic Plans Developing a systematic filtering down process that

facilitates the implementation process and buildsmiddle-manager commitment requires considering

1. organizational structure.2. people.

3. culture.

4. control systems.

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Strategic Implementationand Control (contd)

Strategic Control A formal control system should be developed that

helps keep strategic plans on track by

setting up and testing channels for information onprogress, problems, and the fit of strategicassumptions to the environment.

using software programs for real-time tracking ofproduction, financial, and marketing reports.

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Corrective Action Based on Evaluation andFeedback Negative feedback should prompt corrective action at

the step immediately before the problem occurs.

Possible corrective actions include

updating strategic assumptions.

reformulating strategic plans.

rewriting policies. making personnel changes.

modifying budget allocations.

Strategic Implementationand Control (contd)

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Forecasting

Forecasts Predictions, projections, or estimates of future

situations.

Types of Forecasts Event outcome forecasts: predictions of the outcome

(effects) of highly probable future events.

Event timing forecasts: predictions of when a given

event will occur. Time series forecasts: estimates of future values in a

statistical sequence (e.g., sales forecast).

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Forecasting Techniques

Informed judgment Forecasts relying on intuitive judgments that are

based on how well informed the forecaster is.

Scenario analysis Preparing written descriptions of alternative but

equally likely future situations.

Longitudinal scenarios: describing how the future

situations will evolve from the present. Cross-sectional scenarios: describing future

situations at a given point in time.

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Forecasting Techniques (contd)

Surveys A forecasting technique involving face-to-face

interviews and mail or e-mail questionnaires. Problems with surveys

Construction of the survey instrument. Cost of administration. Errors in data collection and interpretation.

Trend Analysis The hypothetical extension of a past series of events

into the future.

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