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Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
Chapter 8   Strategic Management
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Chapter 8 Strategic Management

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    • 1. Chapter 8 STRATEGIC MANAGEMENT © 2003 Pearson Education Canada Inc. 8.1
    • 2. LEARNING OBJECTIVES
      • You should be able to:
        • Explain the importance of strategic management
        • Describe the steps in the strategic management process
        • Explain SWOT analysis
        • Differentiate corporate-, business-, and functional-level strategies
      8.2
    • 3. LEARNING OBJECTIVES (continued)
      • You should be able to (continued):
        • Explain what competitive advantage is and why it’s important to organizations
        • Describe the five competitive forces
        • Identify the various competitive strategies
      8.3
    • 4. THE IMPORTANCE OF STRATEGIC MANAGEMENT
      • What Is Strategic Management?
        • A set of managerial decisions and actions that determines the long-run performance of an organization
      • Purposes of Strategic Management
        • Involved in many decisions that managers make
        • Companies with formal strategic management systems have higher financial returns than companies with no such system
        • Important in profit and not-for-profit organizations
      8.4
    • 5. THE STRATEGIC MANAGEMENT PROCESS (Exhibit 8.1) 8.5
    • 6. THE STRATEGIC MANAGEMENT PROCESS
      • Step 1: Identifying the Organization’s Current Mission, Objectives, and Strategies
        • Mission
          • statement of the purpose of an organization
          • important in profit and not-for-profit organizations
          • important to identify the goals currently in place and the strategies currently being pursued
      8.6
    • 7. COMPONENTS OF A MISSION STATEMENT (Exhibit 8.2) 8.7
    • 8. THE STRATEGIC MANAGEMENT PROCESS (continued)
      • Step 2: Analyzing the Environment
        • successful strategies are aligned with the environment
        • examine both the specific and general environments to determine what trends and changes are occurring
      • 3. Identifying Opportunities and Threats
        • opportunities - positive trends in the external environmental
        • threats - negative trends in the external environment
      8.8
    • 9. THE STRATEGIC MANAGEMENT PROCESS (continued)
      • Step 4: Analyzing the Organization’s Resources and Capabilities
        • examine the inside of the organization
        • available resources and capabilities always constrain the organization in some way
        • core competencies - major value-creating skills, capabilities and resources that determine the organization’s competitive weapons
      8.9
    • 10. THE STRATEGIC MANAGEMENT PROCESS (continued)
      • Step 5: Identifying Strengths and Weaknesses
        • Strengths - activities the organization does well or any unique resource
        • Weaknesses - activities the organization does not do well or resources it needs but does not possess
        • organization’s culture has its strengths and weaknesses
        • SWOT analysis - analysis of the organization’s strengths, weaknesses, opportunities, and threats
      8.10
    • 11. IDENTIFYING THE ORGANIZATION’S OPPORTUNITIES (Exhibit 8.3) Organization’s Opportunities Organization’s Resources/Abilities Opportunities in the Environment © 2003 Pearson Education Canada Inc. 8.11
    • 12. THE STRATEGIC MANAGEMENT PROCESS (continued)
      • Step 6: Formulating Strategies
        • Require strategies at the corporate, business, and functional levels of the organization
        • Strategy formulation follows the decision-making process
      • Step 7: Implementing Strategies
        • A strategy is only as good as its implementation
      • Step 8: Evaluating Results
        • Control process to determine the effectiveness of a strategy
      8.12
    • 13. TYPES OF ORGANIZATIONAL STRATEGIES
      • Corporate-Level Strategy
        • Determines
          • what businesses a company should be in or wants to be in
          • the direction that the organization is going
          • the role that each business unit will play
      8.13
    • 14. LEVELS OF ORGANIZATIONAL STRATEGY (Exhibit 8.4) © 2003 Pearson Education Canada Inc. 8.14
    • 15. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Corporate-level Strategy (continued)
        • Grand Strategy - Stability
          • no significant change is proposed
          • organization’s performance is satisfactory
          • environment appears to be stable and unchanging
      8.15
    • 16. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Corporate-level Strategy (continued)
        • Grand Strategy - Growth
          • seeks to increase the level of the organization’s operations
          • related diversification - grow by merging with or acquiring firms in different but related industries
          • unrelated diversification - grow by merging with or acquiring firms in different and unrelated industries
        • Grand Strategy - Retrenchment - designed to address organizational weaknesses that are leading to performance declines
      8.16
    • 17. SWOT ANALYSIS AND GRAND STRATEGIES (Exhibit 8.5) Corporate Growth Strategies Corporate Stability Strategies Corporate Retrenchment Strategies Corporate Stability Strategies © 2003 Pearson Education Canada Inc. 8.17 Abundant Environmental Opportunities Critical Environmental Threats Critical Weaknesses Valuable Strengths Environmental Status Firm Status
    • 18. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Corporate-Level Strategy (continued)
        • Corporate Portfolio Analysis - used when corporate strategy involves a number of business
          • Boston Consulting Group (BCG) matrix -- strategy tool that guides resource allocation decisions on basis of market share and growth rate of SBU
      8.18
    • 19. THE BCG MATRIX (Exhibit 8.6) Stars Cash Cows Dogs Question Marks 8.19 © 2003 Pearson Education Canada Inc. Market Share High Low High Low Anticipated Growth Rate
    • 20. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Corporate-Level Strategy (continued)
        • BCG matrix (continued)
          • strategic implications of the matrix
            • cash cows - “milk”
            • stars - require heavy investment
            • question marks - attractive but hold a small market share
            • dogs - sold off or liquidated
      8.20
    • 21. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Business-Level Strategy
        • Determines how an organization should compete in each of its businesses
        • Strategic business units - independent businesses that formulate their own strategies
        • Role of Competitive Advantage
          • competitive advantage - sets an organization apart by providing a distinct edge
            • comes from the organization’s core competencies
            • not every organization can transform core competencies into a competitive advantage
            • once created, must be able to sustain it
      8.21
    • 22. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Business-Level Strategy (continued)
        • Competitive Strategies
          • industry analysis based on five competitive forces
            • Threat of new entrants - affected by barriers to entry
            • Threat of substitutes - affected by buyer loyalty and switching costs
            • Bargaining power of buyers - affected by number of customers, availability of substitute products
      8.22
    • 23. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Business-Level Strategy (continued)
        • Competitive Strategies (continued)
          • industry analysis based on five competitive forces
            • Bargaining power of suppliers - affected by degree of supplier concentration
            • Existing rivalry - affected by industry growth rate, demand for firm’s product or service, and product differences
      8.23
    • 24. Current Rivalry Industry Competitors FORCES IN THE INDUSTRY ANALYSIS (Exhibit 8.7) Threat of New Entrants Threat of Substitutes Bargaining Power or Buyers Bargaining Power or Suppliers © 2003 Pearson Education Canada Inc. 8.24 Suppliers New Entrants Buyers Substitutes
    • 25. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Business-Level Strategy (continued)
        • Competitive strategies (continued)
          • Porter’s three generic strategies
            • cost leadership - goal is to become the lowest-cost producer in the industry
            • differentiation - offer unique products that are widely valued by customers
            • focus - aims at a cost advantage or differentiation advantage in a narrow segment
      8.25
    • 26. REQUIREMENTS FOR SUCCESSFULLY PURSUING PORTER’S COMPETITIVE STRATEGIES (Exhibit 8.8) 8.26
    • 27. TYPES OF ORGANIZATIONAL STRATEGIES (continued)
      • Functional-Level Strategy
        • used to support the business-level strategy
        • creates an appropriate supporting role for each functional area of the organization
      8.27

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