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Chapter 7

Chapter 7






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    Chapter 7 Chapter 7 Presentation Transcript

    • Chapter Seven Strategic Management: Planning for Long-Term Success
    • Chapter Objectives
      • Define the term strategic management and explain its relationship to strategic planning, implementation, and control.
      • Explain the concept of synergy and identify four kinds of synergy.
      • Describe Porter’s model of generic competitive strategies.
      • Identify and explain the major contribution the business ecosystems model makes to strategic thinking.
    • Chapter Objectives (cont’d)
      • Identify seven basic Internet business models and four Internet strategy lessons.
      • Identify and describe the four steps in the strategic management process.
      • Explain the nature and purpose of SWOT analysis.
      • Describe the three types of forecasts.
    • Why All Managers Need an Understanding of Strategic Management
      • A strategic orientation encourages far-sightedness in managers.
      • Employees who think in strategic terms tend to understand better how top managers think and why they make the decisions they do.
      • The trend toward greater teamwork and cooperation throughout the planning cycle is eroding the traditional distinction between those who plan and those who implement plans.
    • Strategic Management = Strategic Planning + Implementation + Control
      • Strategic Management
        • The ongoing process of ensuring a competitively superior fit between an organization and its changing environment
          • Includes budget control, long-range planning, and strategic planning
          • Merges strategic planning, implementation, and control to create a dynamic process
          • Requires every employee to consider the “big picture”
          • Involves strategy innovation in rethinking the basis for competition (business model) in the industry
    • Strategic Management = Strategic Planning + Implementation + Control (cont’d)
      • Strategy
        • An integrated externally oriented perception of how to achieve the organization’s mission
      • Strategic Planning
        • The process of determining how to pursue the organization’s long-term goals with resources expected to be available
    • Thinking Strategically (Including E-Business Strategies)
      • 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
    • Porter’s Generic Competitive Strategies
      • Model’s 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 to provide a competitive advantage in pricing over competitors
      • Differentiation Strategy
        • Providing unique and superior value for the customer that builds brand loyalty
    • Figure 7.1: Porter’s Generic Competitive Strategies Source: Reprinted with the permission of The Free Press, a division of Simon & Schuster from THE COMPETITIVE ADVANTAGE OF NATIONS by Michael E. Porter. Copyright © l990, 1998 by Michael E. Porter.
    • Porter’s Generic Competitive Strategies (cont’d)
      • Cost Focus Strategy
        • Attempting to gain a competitive edge in a narrow (or regional) market segment by controlling (competitively dominating) the segment
      • Focused Differentiation
        • Achieving a competitive edge by delivering a superior product and/or service to a limited audience
    • Business Ecosystems
      • Business Ecosystem
        • A business ecosystem is 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 selectively cooperate and compete to achieve both their individual and collective goals, which they could not achieve on their own.
        • Greater strategic cooperation is needed to foster the the spread of realized innovation.
    • E-Business Strategies for the Internet
      • Internet Strategy Lessons
        • The Internet changes everything, but it doesn’t change everything overnight.
        • Some of the old rules still apply. An investment should still either save you money or make you money.
        • First, we overestimated the Internet; don’t underestimate it now. Its long-term impact will likely exceed expectations.
        • Evolving Internet technologies are still emerging.
        • There is no one-size-fits-all Internet strategy.
    • E-Business Strategies for the Internet (cont’d)
      • Internet Strategy Lessons (cont’d)
        • Customer loyalty is built with reliable brand names and “sticky” web sites.
        • Bricks and clicks: Blending the best of two worlds
        • E-business partnering should not dilute strategic control or ethical standards.
    • The Strategic Management Process
      • Four Steps in the Strategic Management Process
        • Formulation of a grand strategy
        • Formulation of strategic plans
        • Implementation of strategic plans
        • Strategic control
    • Figure 7.2: The Strategic Management Process
    • Formulation of a Grand Strategy
      • Grand Strategy
        • A general explanation of how the organization’s mission is to be accomplished
      • Situational Analysis
        • Finding the organization’s niche by performing a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis to match unfolding opportunities with resources being acquired
        • Capability profile: Identifying the organization’s strengths and weaknesses
    • Figure 7.3: Determining Strategic Direction Through Situational (SWOT) Analysis
    • Formulation of a Grand Strategy (cont’d)
      • Situational Analysis (cont’d)
        • Key capabilities for today’s companies
          • Quick response to market trends
          • Rapid product development
          • Rapid production and delivery
          • Continuous cost reduction
          • Continuous improvement of processes, human resources, and products
          • Greater flexibility of operations
    • Formulation of a Grand Strategy (cont’d)
      • The Need for Speed
        • Speed has become an important competitive advantage.
        • Speed involves more than just doing the same old things faster.
        • Reengineering: Radically redesigning the entire business cycle for greater strategic speed
    • 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 appropriate personnel.
      • 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.
    • Strategic Implementation and Control
      • Implementation of Strategic Plans
        • Developing a systematic filtering-down process that facilitates the implementation process and builds middle-manager commitment requires a company to consider:
          • Organizational structure
          • People
          • Culture
          • Control systems
    • Strategic Implementation and Control (cont’d)
      • A formal control system should be developed that helps keep strategic plans on track by
        • Setting up and testing channels for information on progress, problems, and the fit of strategic assumptions to the environment
        • Using software programs for real-time tracking of production, financial, and marketing reports
    • Strategic Implementation and Control (cont’d)
      • Corrective Action Based on Evaluation and Feedback
        • 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
    • 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)
    • 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
    • Forecasting Techniques (cont’d)
      • 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
    • Summary
      • Strategic management sets the stage for virtually all managerial activity.
      • Strategic thinking is necessary for successful strategic management and planning.
      • Porter’s generic competitive strategies model helps managers create a profitable “fit” between the organization and its environment.
      • Competitors coevolve into business ecosystems when they use both competition and cooperation.
      • Effective use of the correct Internet strategies affords opportunities for competitive advantage.
    • Terms to Understand
      • Strategic management
      • Strategy
      • Synergy
      • Differentiation
      • Business ecosystem
      • Grand strategy
      • Situational analysis
      • Capability profile
      • Reengineering
      • Forecasts
      • Event outcome forecasts
      • Event timing forecasts
      • Time series forecasts
      • Scenario analysis
      • Longitudinal scenarios
      • Cross-sectional scenarios
      • Trend analysis