Chapter 8 Strategic Management

38,435 views
37,846 views

Published on

Published in: Business
3 Comments
21 Likes
Statistics
Notes
No Downloads
Views
Total views
38,435
On SlideShare
0
From Embeds
0
Number of Embeds
24
Actions
Shares
0
Downloads
1,383
Comments
3
Likes
21
Embeds 0
No embeds

No notes for slide
  • 1
  • Chapter 8 Strategic Management

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

    ×