Chapter 7-2070k1970

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strategic management

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Chapter 7-2070k1970

  1. 1. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 1CHAPTER 7STRATEGIC MANAGEMENT
  2. 2. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 2Lecture summary• The concept of strategic management• Role of competitive analysis in strategyformulation• Formulating corporate level strategy• Formulating business level strategy• Formulating functional level strategy• Strategy implementation
  3. 3. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 3Concept of strategicmanagement‘Large-scale action plan for interacting withthe environment to achieve long-term goals.’
  4. 4. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 4Concept of strategicmanagement• Strategic management process• Importance of strategic management• Levels of strategy
  5. 5. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 5Concept of strategicmanagementStrategic management process:‘Process through which managers formulateand implement strategies geared tooptimising strategic goal achievement, givenavailable environmental and internalconditions.’
  6. 6. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 6Concept of strategicmanagementStrategic management process:• Strategy formulation– Identify mission & goals– Competitive situation analysis (external & internal)– Develop/formulate strategies to achieve identified goals• Strategy implementation– Implement plans– Control/monitor execution of plans
  7. 7. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 7Strategic management processEnvironmentalanalysisStrategiccontrolStrategyformulationStrategyimplementationConduct SWOTanalysisFormulatemission &strategic goalsInternal(organisational)assessment
  8. 8. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 8Importance of strategicmanagementImportant because:• Helps organisations develop a competitiveadvantage (significant edge over competition indealing with competitive forces).• Provides a sense of long-term direction fororganisation members.• Highlights need for innovation.• Process involves members and fostersunderstanding of goals/strategy.
  9. 9. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 9Importance of strategicmanagementCompetitive advantageDirection forthe organisationSupports innovationBuilds managercommitment
  10. 10. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 10Levels of strategyCorporate levelBusiness levelFunctional level
  11. 11. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 11Levels of strategyCorporate level strategy:‘Type of strategy addressing what businessesthe organisation will operate, how strategiesof those businesses will be co-ordinated tostrengthen the organisation’s competitiveposition, and how resources will be allocatedamong businesses.’
  12. 12. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 12Levels of strategyBusiness level strategy:‘Type of strategy concentrating on the bestmeans of competing within a particularbusiness while also supporting corporatelevel strategy.’
  13. 13. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 13Levels of strategyFunctional level strategy:‘Type of strategy focussing on action plans formanaging a particular functional area within abusiness in a way that supports businesslevel strategy.’
  14. 14. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 14Competitive analysis in strategyformulationBefore managers devise an effective strategyfor getting a competitive edge, they mustanalyse the organisation’s competitivesituation.This is done through:• Environmental analysis (external)• Organisational assessment (internal)
  15. 15. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 15Environmental assessmentTheorganisation Social AnalysisPolitical &RegulatoryAnalysisHuman ResourcesAnalysisIndustry &MarketAnalysisCompetitorAnalysisEconomicAnalysis
  16. 16. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 16Competitive analysis in strategyformulationSWOT analysis:Method of analysing an organisation’scompetitive situation involving assessingorganisational strengths (S), weaknesses(W), environmental opportunities (O) andthreats (T).
  17. 17. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 17Competitive analysis in strategyformulationEnvironmental assessment:Five competitive forces model (Porter):1. Rivalry2. Bargaining power of customers3. Bargaining power of suppliers4. Threat of new entrants5. Threat of substitute products/services.
  18. 18. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 18Competitive analysis in strategyformulationOrganisational assessment:• ValueDo the firm’s resources & capabilities add value by enabling it to exploitopportunities or neutralise threats?• RarenessHow many competing firms already possess these valuable resources &capabilities?• ImitabilityDo firms without a resource or capability face a cost disadvantage?• OrganisationIs the firm organised to exploit competitive potential of its resources &capabilities?
  19. 19. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 19Formulating corporate levelstrategyCorporate level strategy is the overall strategyan organisation follows. Its developmentinvolves selecting a grand strategy and usingportfolio-strategy approaches to determine thevarious businesses making up theorganisation:• Grand strategy• Portfolio-strategy approaches.
  20. 20. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 20Formulating corporate levelstrategyGrand strategies:• GrowthConcentrationVertical integrationDiversification• StabilityHarvestTurnaround• DefensiveDivestitureBankruptcyLiquidation
  21. 21. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 21Formulating corporate levelstrategyPortfolio strategies:Method of analysing an organisation’s mix of businesses interms of both individual and collective contributions tostrategic goals.• BCG growth–share matrixCompares businesses in an organisation’s portfolio on thebasis of relative market market share and market growthrate.• Product–market evaluation matrixCompares businesses’ strength against product/market life-cycle.
  22. 22. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 22BCG growth-share matrixRelative competitive position (market share)MarketgrowthrateHigh LowCash cowsStarsDogsQuestionmarks
  23. 23. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 23Product-market evaluationmatrixBusiness unit’s competitive positionStrong Average WeakProduct/ DevelopmentMarket GrowthLife cycle ShakeoutGrowth MaturitySaturationDecline
  24. 24. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 24Formulating business levelstrategy• Business level strategy is concerned withhow a particular business competes.• The best known approach for strategydevelopment is based on Porter’s research.
  25. 25. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 25Formulating business levelstrategyGeneric business strategies:Porter outlined three generic business levelstrategies to gain competitive advantage overother firms operating in the same industry.
  26. 26. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 26Formulating business levelstrategyGeneric business strategies (Porter):• Cost leadership strategyEmphasises operational efficiency i.e. overall costs are lowerthan competitors.• Differentiation strategyAttempts to develop products/services viewed as unique inthe industry.• Focus strategyConcentration on a segment, portion of a market.
  27. 27. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 27
  28. 28. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 28Formulating functional levelstrategyFunctional level strategies spell out specificways that functional areas can bolster businesslevel strategy.For example:• Under a product differentiation strategy, the R & Ddept. may accelerate the innovation process toprovide new products in advance of competitors.
  29. 29. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 29Strategy implementationStrategy implementation involvesmanagement activities needed to put thestrategy in motion, institute strategic controlsfor monitoring progress, and ultimatelyachieve organisation goals.
  30. 30. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 30Strategy implementationStrategyformulationCarry out plans:•Technology•Human resources•Reward systems•Decision processes•structureMaintain control:•Control systems•Adjustments
  31. 31. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 31Lecture summary• Concept of strategic management– Process– Importance– Levels• Competitive analysis in strategy formulation– SWOT analysis– Environmental assessment– Organisational assessment
  32. 32. © 2003 McGraw-Hill Australia Pty Ltd. PowerPoint 32Lecture summary• Formulating corporate level strategy– Grand strategy– Portfolio strategies• Formulating business level strategy– Porter generic strategies: cost, differentiation & focus• Formulating corporate level strategy• Strategy implementation– Control systems & adjustments

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