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Griffin Chap08 Griffin Chap08 Presentation Transcript

  • CHAPTER 8 Managing Strategy and Strategic Planning Copyright © by Houghton Mifflin Company. All rights reserved. PowerPoint Presentation by Charlie Cook
  • Learning Objectives
    • After studying this chapter, you should be able to:
      • Discuss the components of strategy, types of strategic alternatives, and the distinction between strategy formulation and strategy implementation.
      • Describe how to use SWOT analysis in formulating strategy.
      • Describe how business-level strategies are implemented.
      • Identify and describe various alternative approaches to corporate-level strategy formulation.
      • Describe how corporate-level strategies are implemented.
  • Chapter Outline
    • The Nature of Strategic Management
      • The Components of Strategy
      • Types of Strategic Alternatives
      • Strategy Formulation and Implementation
    • Using SWOT Analysis to Formulate Strategy
      • Evaluating Strengths
      • Evaluating Weaknesses
      • Evaluating Opportunities and Threats
    • Formulating Business-Level Strategies
      • Porter’s Generic Strategies
      • The Miles and Snow Topology
      • Product Life Cycle Strategies
    • Implementing Business-Level Strategies
      • Implementing Porter’s Generic Strategies
      • Implementing Miles and Snow’s Strategies
    • Formulating Corporate-Level Strategies
      • Single-Product Strategy
      • Related Diversification
      • Unrelated Diversification
    • Implementing Corporate-Level Strategies
      • Becoming a Diversified Firm
      • Managing Diversification
  • The Nature of Strategic Management
    • Strategy
      • A comprehensive plan for accomplishing an organization’s goals.
    • Strategic Management
      • A way of approaching business opportunities and challenges.
      • A comprehensive and ongoing management process aimed at formulating and implementing effective strategies which align the organization with its environment to achieve major organizational goals.
    • Effective Strategies
      • Strategies that promote a superior alignment between the organization and its environment and the achievement of its goals.
  • Components of Strategy
    • Distinctive Competence
      • Something an organization does exceptionally well.
    • Scope
      • Range of markets in which an organization will compete.
    • Resource Deployment
      • How an organization will distribute its resources across the areas in which it competes.
  • Types of Strategic Alternatives
    • Business-level Strategy
      • The set of strategic alternatives that an organization chooses from as it conducts business in a particular industry or a particular market.
    • Corporate-level Strategy
      • The set of strategic alternatives that an organization chooses from as it manages its operations simultaneously across several industries and several markets.
  • Strategy Formulation and Implementation
    • Strategy Formulation
      • The set of processes involved in creating or determining the organization’s strategies; it focuses on the content of strategies.
    • Strategy Implementation
      • The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved.
  • Strategy Formulation and Implementation (cont’d)
    • Deliberate Strategy
      • A plan, chosen and implemented to support specific goals, that is the result of a rational, systematic, and planned process of strategy formulation and implementation.
    • Emergent Strategy
      • A pattern of action that develops over time in the absence of goals or missions, or despite goals and missions.
  • SWOT Analysis
    • Strengths
    • Weaknesses
    • Opportunities
    • Threats
    Figure 8.1 Mission An organization’s fundamental purpose Good Strategies SWOT Analysis To formulate strategies that support the mission Those that support the mission and • exploit opportunities and strengths • neutralize threats • avoid weaknesses Internal Analysis Strengths (distinctive competencies) Weaknesses Threats External Analysis Opportunities
  • Using SWOT Analysis to Formulate Strategy
    • Evaluating Organizational Strengths
      • Organizational strengths
        • are skills and abilities enabling an organization to conceive of and implement strategies.
      • Common organizational strengths
        • are organizational capabilities possessed by numerous competing firms.
      • Distinctive competencies
        • are useful for competitive advantage and superior performance.
      • Imitation of distinctive competencies
        • is duplicating another firm’s distinctive competence.
  • Using SWOT Analysis to Formulate Strategy (cont’d)
    • Evaluating Organizational Strengths (cont’d)
      • Sustained competitive advantage
        • occurs when a distinctive competence cannot be easily duplicated.
        • is what remains after all attempts at strategic imitations have ceased.
      • Strategic imitation is difficult when:
        • Distinctive competence is based on unique historical circumstances.
        • Competitors do not understand the nature or character of a firm’s competence.
        • The competence is based on a complex phenomenon, such as organizational culture.
  • Using SWOT Analysis to Formulate Strategy (cont’d)
    • Evaluating Organizational Weaknesses
      • Organizational weaknesses are skills and capabilities that do not enable an organization to choose and implement strategies that support its mission.
      • Weaknesses can be overcome by:
        • investments to obtain the strengths needed.
        • modification of the organization’s mission so it can be accomplished with the current workforce.
      • Competitive disadvantage is a situation in which an organization fails to implement strategies being implemented by competitors.
  • Using SWOT Analysis to Formulate Strategy (cont’d)
    • Evaluating an Organization’s Opportunities and Threats
      • Organizational opportunities are areas in the organization’s environment that may generate high performance.
      • Organizational threats are areas in the organization’s environment that make it difficult for the organization to achieve high performance.
  • Formulating Business-Level Strategies
    • Porter’s Generic Strategies
      • Differentiation strategy
        • An organization seeks to distinguish itself from competitors through the quality of its products or services.
      • Overall cost leadership strategy
        • An organization attempts to gain competitive advantage by reducing its costs below the costs of competing firms.
      • Focus strategy
        • An organization concentrates on a specific regional market, product line, or group of buyers.
  • Porter’s Generic Strategies Table 8.1
  • The Miles and Snow Topology Table 8.2
  • Strategies Based on Product Life Cycle
    • The Product Life Cycle
    Figure 8.2 Introduction Time Stages Growth Maturity Decline High Low Sales Volume
  • Implementing Business-Level Strategies
    • Implementing Porter’s Generic Strategies
      • Differentiation Strategy
        • Marketing and sales must emphasize high-quality, high-value image of the organization’s products or services.
      • Overall Cost Leadership Strategy
        • To support cost leadership, marketing and sales are likely to focus on simple product attributes and how these product attributes meet customer needs in a low-cost and effective manner.
      • Focus Strategy
        • This strategy is implemented via the same approaches used for differentiation and cost leadership, depending on which one (differentiation or cost leadership) is the proper basis for competing in or for a specific market segment, product category, or group buyers.
  • Implementing Business-Level Strategies (cont’d)
    • Implementing Miles and Snow’s Strategies
      • Prospector Strategy
        • An organization using this strategy must encourage creativity to seek out new market opportunities and to take risks.
        • An organization can develop the flexibility to meet changing market conditions by decentralizing its organizational structure.
      • Defender Strategy
        • To support this strategy, an organization will focus on defending its current markets by lowering its costs and/or improving the performance of current products.
      • Analyzer Strategy
        • Organizations using this strategy incorporate elements of both the prospector and the defender strategies in an attempt to maintain current business and to be somewhat innovative.
  • Formulating Corporate-Level Strategies
    • Strategic Business Units
      • Each business or group of businesses within an organization engaged in serving the same markets, customers, or products.
    • Diversification
      • The number of businesses an organization is engaged in and the extent to which these businesses are related to one another
    • Single Product Strategy
      • A strategy in which an organization manufactures one product or service and sells it in a single geographic market.
  • Related Diversification
    • Related Diversification
      • A strategy in which an organization operates in several different businesses, industries, or markets that are somehow linked.
    • Bases of Relatedness in Implementing Related Diversification
    Table 8.3
  • Related Diversification (cont’d)
    • Advantages of Related Diversification
      • Reduces organization’s dependence on any one of its business activities and thus reduces economic risk.
      • Reduces overhead costs associated with managing any one business through economies of scale and economies of scope.
      • Allows an organization to exploit its strengths and capabilities in more than one business.
      • Synergy exists among a set of businesses when the businesses’ value together is greater than their economic value separately.
  • Formulating Corporate-Level Strategies (cont’d)
    • Unrelated Diversification
      • A strategy in which an organization operates multiple businesses that are not logically associated with one another.
    • Advantages
      • Stable corporate-level performance over time due to business cycle differences among the multiple businesses.
      • Resources can be allocated to areas with the highest return potentials to maximize corporate performance.
    • Disadvantages
      • Strategy does not usually lead to high performance due to the complexity of managing a diversity of businesses.
      • Firms with unrelated strategies fail to exploit important synergies, putting them at a competitive disadvantage to firms with related diversification strategies.
  • Implementing Corporate-Level Strategies
    • Becoming a Diversified Firm
      • Internal Development of New Products
        • Developing products and services within the boundaries of traditional business operations.
      • Replacement of Suppliers and Customers
        • Backward Vertical Integration
          • Beginning a business that furnishes resources previously handled by a supplier.
        • Forward Vertical Integration
          • Beginning a business previously handled by an intermediary and selling more directly to customers.
  • Implementing Corporate-Level Strategies (cont’d)
    • Becoming a Diversified Firm
      • Merger and Acquisitions
        • A merger is the purchase of one firm by another firm of approximately the same size.
        • An acquisition is the purchase of a firm by another firm that is considerably larger.
      • Purposes of Mergers and Acquisitions
        • To diversify through vertical integration.
        • To acquire complementary products or services linked by a common technology and common customers.
        • To create or exploit synergies that reduce the combined organizations’ costs of doing business to increase revenues.
  • Managing Diversification
    • Major Tools for Managing Diversification
      • Organization structure
        • Detailed discussion of organization structure is contained in Chapter 12.
      • Portfolio management techniques
        • Methods that diversified organizations use to make decisions about what businesses to engage in and how to manage these multiple businesses to maximize corporate performance.
      • Two important portfolio management techniques are the BCG Matrix and the GE Business Screen.
  • Managing Diversification (cont’d)
    • BCG Matrix
      • A method of evaluating businesses relative to the growth rate of their market and the organization’s share of the market.
      • The matrix classifies the types of businesses that a diversified organization can engage as:
        • “Dogs” —have small market shares and no growth prospects.
        • “ Cash cows”—have large shares of mature markets.
        • “ Question marks”—have small market shares in quickly growing markets.
        • “ Stars”—have large shares of rapidly growing markets.
  • The BCG Matrix Figure 8.3 Source: Perspectives, No. 66, “The Product Portfolio,” Adapted by permission from The Boston Consulting Group, Inc., 1970. Relative market share Cash cows Dogs High Low High Low Question marks Stars Market growth rate
  • Managing Diversification
    • GE Business Screen
      • A method of evaluating business in a diversified portfolio along two dimensions, each of which contains multiple factors:
        • Industry attractiveness.
        • Competitive position (strength) of each firm in the portfolio.
      • In general, the more attractive the industry and the more competitive a business is, the more resources an organization should invest in that business.
  • The GE Business Screen Figure 8.4 Source: From Strategy Formulation: Analytical Concepts, by Charles W. Hofer and Dan Schendel. Copyright 1978 West Publishing. Used by permission of South-Western College Publishing, a division of International Thomson Publishing, Inc., Cincinnati, Ohio, 45227. Competitive position Low Winner Medium High Good Competitive position 1. Market share 2. Technological know-how 3. Product quality 4. Service network 5. Price competitiveness 6. Operating costs Industry attractiveness 1. Market growth 2. Market size 3. Capital requirements 4. Competitive intensity Poor Medium Winner Profit producer Winner Average business Loser Question mark Loser Loser Industry growth rate