mgt302 strategic
TRANSCRIPT
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MGT302_STRATEGICMANAGEMENT
WEEK 2
BY
FARRUKH IDREES
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Presentation Sections
Introduction: Aim of the lecture, Some
Concepts about environmental scanning Details: External assessment (Factors
related to PEST)
Conclusion: Summary
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Corporate goals:
Profitability
Growth
Resource Utilization (ROI, ROE)
Market Leadership
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Strategic Management
Systematic analysis of the factors associated
with customers and competitors (the externalenvironment) and the organization itself (the
internal environment) to provide the basis for
rethinking the current management practices.
Its objective is to achieve better alignment ofcorporate policies and strategic priorities.
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Strategic Decision Making
Distinctions
It is marked by four key distinctions
It is based on a systematic, comprehensiveanalysis of internal attributes, and factors external
to the organisation
It is long term and future oriented-usually several
years to a decade or longer-but built onknowledge about the past or present.
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Third it is distinctively opportunistic, always
seeking to take advantage of facorable situationsthat occur outside the organisation.
Strategic thinking involves choices
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Aim of the session
Practical framework for gathering,
assimilating, and analyzing externalinformation.
Over view of I/O approach of strategic
management
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Environmental Scanning
External Assessment/Industry Analysis/External Audit
It focuses on identifying and evaluating trends and events
beyond the control of a single firm, such as increased foreign
competition, population shift, stock market volatility etc..
It reveals the key opportunities and threats confronting an
organization so that managers can formulate strategies to take
advantage of the opportunities and avoid or reduce the impact
of threats.
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Importance of Environmental
Scanning
Strategy is a problem of allocating resources.
If strategy is to be successful, it must allocatesuperior resources against a decisive
opportunity
The idea is to concentrate our strength
against our competitors relative weakness.
Its not the strongest of the species that
survive, not the most intelligent, but the one
most responsive to change.
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Sources for Environmental Scanning
Internet
Key magazines,
Trade Journals
Newspapers
Suppliers
Distributors
Sales persons
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Sources for environmental scanning
Customers
Competitors Communities
Managers
Stockholders
Labor Unions
Trade Associations
Creditors
Consultants
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Industrial Organisation approach
(I/O)
The industrial organisation approach to
competitive advantage advocates thatexternal (industry) factors are more important
than internal factors in a firm achieving
competitive advantage.
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I/O
Porters five forces model is an example of
I/O perspective, which focuses on analysingexternal forces and industry variables as a
basis for getting and keeping competitive
advantage.
Firms performance is based on industryproperties e.g. economies of scale, barriers
to entry, product differentiation, and level of
competitiveness than on internal resources,
capabilities, structures, and operations.
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I/O
it is not a question of whether external or
internal factors are more important in gainingand maintaining competitive advantage.
Effective integration and understanding of
both external and internal factors is the key
to securing and keeping a competitiveadvantage.
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Components ofCompanys
External Environment
All companies operate in a macro
environment shaped by influencesemanating from the economy at large;
population demographics; societal values
and life styles; governmental legislations and
regulations; technological factors; and, closeto home, the industry and competitive arena
in which the company operates
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Components of Companys External
Environment
Macro Environment
PEST
Immediate Industry and Competitive
Environment
Suppliers
Substitute Products
Buyers
New Entrants
Rival Firms
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Competitive Forces
If a firm detects weakness in a competitor, no
mercy at all is shown in capitalizing on itsproblems.
Collecting and evaluating information on
competitors is essential for successful
strategy formulation. Identifying majorcompetitors is not always easy because
many firms have divisions that compete in
different industries.
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Key Questions about Competitors
What are the major competitors
strengths/Weaknesses? What the major competitors objectives and
strategies?
How will the major competitors most likely
respond to current economic, social, cultural,demographic, environmental, political,
governmental, legal, competitive trends
affecting our industry?
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How vulnerable are the major competitors to
our alternative company strategies? How are our products or services positioned
relative to major competitors?
To what extent are new firms entering and
old firms leaving this industry?
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What key factors have resulted in our present
competitive position in this industry? What is the sales and profitability ranking of major
competitors in the industry?
What is the nature of suppliers and distributor
relationships in this industry?
To what extent could substitute products or services
be a threat to competitors in this industry?
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Competitive Intelligence (CI)
It is a systematic and ethical process for gathering
and analyzing information about the competitions
activities and general business trends to further a
businesss goals.
Good CI in business, as in the military, is one of the
keys to success. The more informationa nd
knowledge a firm can obtain about its competitors,the more likely it is that it can formulate and
implement effective strategies.
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Misconceptions about CI
Requires lots of resources
Violates law Unethical business practice
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Objectives of CI Program
To provide a general understanding of a
company and its competitors To identify areas in which competitors are
vulnerable and to assess the impact strategic
actions would have on competitors
To identify potential moves that a competitormight take that would endanger a firms
position in the market
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Marriott and Motorolla agree that all the
information you could wish for can becollected without resorting to unethical
tactics. They keep their intelligence staffs
small, usually under five people, and spend
less than 200K dollars per year on gatheringcompetitive intelligence.
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Key Social Factors:
Birth Rate
Death Rate
Attitude Towards Business
Buying Habits
Average level of Education
Waste Management Air Pollution
Recycling
Attitude towards Product Quality
Attitude towards leisure time
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Key Political Variables:
Changes in Tax Laws Number of Patents
Changes in Patents Laws
Lobbying Activities
Size of Government Budgets World Oil
Pak-American Relations
Import Export Regulations
Level of Governmental Subsidies