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  • 1. What is strategic management? The set of managerial decisions and actions that determines the long-run performance Strategic management of an organisation. Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 4 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 5 Why strategic management is important The strategic management process 1. It results in higher organisational performance. 2. It requires that managers examine and adapt to business environment changes. 3. It coordinates diverse organisational units, helping them focus on organisational goals. 4. It is very much involved in the managerial decision-making process. Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 6 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia Figure 8.1 7 1
  • 2. Strategic management process Components of a mission statement • Customers: Who are the organisation’s customers? Step 1: Identifying the organisation’s • Products or services: What are the organisation’s major products or current mission, objectives, and services? • Markets: Where does the organisation compete geographically? strategies • Technology: How technologically current is the organisation? Mission: the firm’s reason for being • Concern for survival growth, and profitability: Is the organisation The scope of its products and services committed to growth and financial stability? Goals: the foundation for further planning • Philosophy: What are the organisation’s basic beliefs, values, aspirations, and ethical priorities? Measurable performance targets • Self-concept: What is the organisation’s major competitive advantage and Step 2: Conducting an external analysis core competencies? The environmental scanning of specific and general • Concern for public image: How responsive is the organisation to societal and environmental concerns? environments • Concern for employees: Does the organisation consider employees a Focuses on identifying opportunities and threats valuable asset? Source: Based on F. David, Strategic Management, 8th ed. (Upper Saddle River, NJ: Prentice Hall, 2001), pp. 65–66. Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 8 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 9 Identifying the organisation’s Strategic management process (cont’d) opportunities Step 3: Conducting an internal analysis Assessing organisational resources, capabilities, activities, and culture: Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm. Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage. Steps 2 and 3 combined are called a SWOT analysis. (Strengths, Weaknesses, Opportunities, and Threats) Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 10 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia Figure 8.3 11 2
  • 3. Strategic management process (cont’d) Strategic management process (cont’d) Step 4: Formulating strategies Step 5: Implementing strategies Develop and evaluate strategic alternatives Implementation: effectively fitting organisational structure and activities to the environment Select appropriate strategies for all levels in the organisation that provide relative advantage over The environment dictates the chosen strategy; effective competitors strategy implementation requires an organisational structure matched to its requirements. Match organisational strengths to environmental opportunities Step 6: Evaluating results Correct weaknesses and guard against threats How effective have strategies been? What adjustments, if any, are necessary? Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 12 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 13 Types of organisational strategies Levels of organisational strategy Corporate-level strategies Top management’s overall plan for the entire organisation and its strategic business units Types of corporate strategies Growth: expansion into new products and markets Stability: maintenance of the status quo Renewal: redirection of the firm into new markets Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 14 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia Figure 8.4 15 3
  • 4. Corporate-level strategies Growth strategies Growth strategy Concentration Seeking to increase the organisation’s business by Focusing on a primary line of business and increasing expansion into new products and markets. the number of products offered or markets served. Types of growth strategies Vertical integration Concentration Backward vertical integration: attempting to gain control of inputs (become a self-supplier). Vertical integration Forward vertical integration: attempting to gain control of Horizontal integration output through control of the distribution channel and/or Diversification provide customer service activities (eliminating intermediaries). Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 16 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 17 Growth strategies (cont’d) Growth strategies (cont’d) Horizontal integration Stability strategy Combining operations with another competitor in the A strategy that seeks to maintain the status quo to deal same industry to increase competitive strengths and with the uncertainty of a dynamic environment, when the lower competition among industry rivals. industry is experiencing slow- or no-growth conditions, or if the owners of the firm elect not to grow for personal Related diversification reasons. Expanding by merging with or acquiring firms in different, but related industries that are “strategic fits”. Unrelated diversification Growing by merging with or acquiring firms in unrelated industries where higher financial returns are possible. Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 18 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 19 4
  • 5. Growth strategies (cont’d) Corporate portfolio analysis Renewal strategies BCG Matrix Developing strategies to counter organisation Developed by the Boston Consulting Group weaknesses that are leading to performance declines. Considers market share and industry growth rate Retrenchment: focusing of eliminating non-critical weaknesses and restoring strengths to overcome current Classifies firms as: performance problems. Cash cows: low growth rate, high market share Turnaround: addressing critical long-term performance Stars: high growth rate, high market share problems through the use of strong cost elimination measures and large-scale organisational restructuring Question marks: high growth rate, low market share solutions. Dogs: low growth rate, low market share Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 20 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 21 The BCG Matrix Business-level strategy Business-level strategy A strategy that seeks to determine how an organisation should compete in each of its SBUs (strategic business units). Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia Figure 8.5 22 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 23 5
  • 6. The role of competitive advantage The role of competitive advantage (cont’d) Competitive advantage Sustainable competitive advantage An organisation’s distinctive competitive edge that is Continuing over time to effectively exploit resources and sourced and sustained in its core competencies. develop core competencies that enable an organisation to keep its edge over its industry competitors. Quality as a competitive advantage Differentiates the firm from its competitors. Can create a sustainable competitive advantage. Represents the company’s focus on quality management to achieve continuous improvement and meet customers’ demand for quality. Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 24 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 25 Forces in the industry analysis Five competitive forces Threat of new entrants The ease or difficulty with which new competitors can enter an industry. Threat of substitutes The extent to which switching costs and brand loyalty affect the likelihood of customers adopting substitutes products and services. Bargaining power of buyers The degree to which buyers have the market strength to hold sway over and influence competitors in an industry. Source: Based on M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980). Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia Figure 8.6 26 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 27 6
  • 7. Five competitive forces Competitive strategies Bargaining power of suppliers Cost leadership strategy The relative number of buyers to suppliers and threats Seeking to attain the lowest total overall costs relative to from substitutes and new entrants affect the buyer- other industry competitors. supplier relationship. Current rivalry Differentiation strategy Intensity among rivals increases when industry growth Attempting to create a unique and distinctive product or rates slow, demand falls, and product prices descend. service for which customers will pay a premium. Focus strategy Using a cost or differentiation advantage to exploit a particular market segment rather a larger market. Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 28 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 29 Strategies for applying e-business Strategic management today techniques The rule of three Cost leadership The competitive forces in an industry, if unfettered, will On-line activities: bidding, order processing, inventory inevitably create a situation where three companies (full- control, recruitment and hiring line generalists) will dominate any given market Differentiation Some firms in the same market become super niche Internet-based knowledge systems, on-line ordering and players and while others end up as “stuck-in-the-ditch” customer support bottom dwellers. Focus Chat rooms and discussion boards, targeted web sites Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 30 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 31 7
  • 8. Customer service strategies Innovation strategies Giving the customers what they want. Possible events Communicating effectively with them. Radical breakthroughs in products. Application of existing technology to new uses. Providing employees with customer Strategic decisions about innovation service training. Basic research Product development Process innovation First mover An organisation that brings a product innovation to market or use a new process innovations Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 32 Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 33 First-mover advantages vs disadvantages Advantages Disadvantages Reputation for being Uncertainty over exact innovative and industry direction technology and leader market will go Cost and learning Risk of competitors benefits imitating innovations Control over scarce Financial and strategic resources and keeping risks competitors from having High development costs access to them Opportunity to begin building customer relationships and customer loyalty Robbins, Bergman, Stagg, Coulter: Management 4e © 2006 Pearson Education Australia 34 8