Strategic management for tu mbs

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Strategic management for tu mbs

  1. 1. June 22, 2013 rijalcpr@gmail.com:9851105671 1STRATEGIC MANAGEMENTTeaching NotesonStrategic Managementfor TU MBSC. P. Rijal, PhDAssociate ProfessorSTRATEGIC MANAGEMENTTeaching NotesonStrategic Managementfor TU MBSC. P. Rijal, PhDAssociate Professor
  2. 2. June 22, 2013 rijalcpr@gmail.com:9851105671 2Unit I: IntroductionUnit Coverage1. Evolution of strategic management2. Characteristics of strategic decisions3. Mintzberg’s model of strategic decision-making4. Components of strategic management: planning,implementation and control5. Importance of strategic implementation in Nepal6. Strategic plan: mission, objectives, strategies7. Levels of objectives and strategies8. Role of CEO in strategic management
  3. 3. June 22, 2013 rijalcpr@gmail.com:9851105671 3Evolution of strategic management° Integral part of overall management process.° Planning process to deal with the rapid change inthe environment.° Has close associations with budgeting (early 1990s),long-range planning (1950s), and strategic planning(1960s), and is developed since mid 1980s.° A proactive, reactive, and futuristic managementprocess.° Emphasizes the strategy development needs to bedriven by the market and its environment rather thanlimiting to only internal orientation.
  4. 4. June 22, 2013 cprijal@hotmail.com:2001015 4Strategic Market Management …° Developed along with the evolution of variousmanagement systems.° Follows the evolution of Budgeting, Long-Range Planning, and Strategic Planning.° Sometimes all these terms are usedinterchangeably.
  5. 5. June 22, 2013 rijalcpr@gmail.com:9851105671 5Business StrategyO The means an organization uses to achieve itsobjectivesO Serves as a tool for the implementation ofmanagement’s concept of business scope, mission,purpose, and objectivesO Formula in running whole businessO A direction for the organization both in shorter as wellas long run
  6. 6. June 22, 2013 rijalcpr@gmail.com:9851105671 6Strategic Management Aims at:° How to influence the external factors and makethem supportive to the operations of theorganization, and how to most efficiently andeffectively use the internal forces whereby theresources (strengths) are best utilized toachieve the highest possible rate ofproductivity for the organization.
  7. 7. June 22, 2013 rijalcpr@gmail.com:9851105671 7Characteristics of strategic decisionsThe following are some of the major features of strategicdecisions:1. External, Market Orientation2. Proactive Strategies3. Emphasis on Information System4. On-Line Analysis and Decision Making5. Entrepreneurial Thrust6. Strategic Fitness in Implementation7. Matching with the Global Realitiescontd…
  8. 8. June 22, 2013 rijalcpr@gmail.com:9851105671 8Characteristics contd…8. Longer Time Horizon9. Empirical Research Based10. Interdisciplinary Developments --MarketingOrganizational BehaviorFinance and AccountingEconomicsStrategy
  9. 9. June 22, 2013 rijalcpr@gmail.com:9851105671 9A Business Strategy SpecificationIncludes the determination of:1. The product market in which the business is to compete2. The level of investment3. The functional area strategies needed to compete in theselected product market4. The strategic assets or competencies that underline thestrategy and provide sustainable competitive advantage (SCA)Multiple Businesses5. The allocation of resources over the business units6. The development of synergistic effects across the business-thecreation of value by having business units that support andcomplement each other.
  10. 10. June 22, 2013 rijalcpr@gmail.com:9851105671 10Mintzberg’s model of strategic decision components Mintzberg focused on:
  11. 11. June 22, 2013 rijalcpr@gmail.com:9851105671 11Mintzberg’s model of strategic decision-making Mintzberg focused on:
  12. 12. June 22, 2013 rijalcpr@gmail.com:9851105671 12Components of Strategic ManagementPlanning and developmentImplementationControl(Please follow the detailed diagram developedin class)
  13. 13. June 22, 2013 rijalcpr@gmail.com:9851105671 13Components and Process of Strategic Market ManagementStrategic AnalysisExternal Analysis1. Customer analysis2. Competitor analysis3. Market analysis4. Environmental analysisStrengths, weaknesses, stg. problems,constraints, and uncertaintiesOpportunities, threats, trends,and strategic uncertaintiesInternal Analysis1. Performance analysis2. Determinants of strategic optionsStrategy Identification and SelectionDetermination of Marketing StrategiesMarketing Planning, Implementation and Control
  14. 14. June 22, 2013 rijalcpr@gmail.com:9851105671 14Importance of strategic thinking in Nepal Strategic management aims at bringing in systemthinking practices in business whereas Nepal is yet toestablish its national constitution. Strategic management provides with external,proactive view of managing institutions, whereasmost of the Nepalese institutions are yet to bemanaged with specific norms and operatingstandards. Strategic management aims to provide inputs on howto compete in competitive environment, whereasNepalese institutions are yet to understand the valueof competing in business. Most essential in every sector.
  15. 15. June 22, 2013 rijalcpr@gmail.com:9851105671 15Strategic Plan: Mission, Objectives and StrategiesFollow the subsequent slides
  16. 16. June 22, 2013 rijalcpr@gmail.com:9851105671 16Components of Corporate Strategy1. Scope, mission, and intent2. Objectives3. Development strategy4. Resources allocation5. Source of synergy
  17. 17. June 22, 2013 rijalcpr@gmail.com:9851105671 171. Scope, mission, and intent* What business should the firm be in?,* What customer needs, market segments,and/or technologies should the firm focus on?,and* What should be the ending purpose or theintent of the firm?
  18. 18. June 22, 2013 rijalcpr@gmail.com:9851105671 18MarketOrientedMarketOrientedFit MarketEnvironmentFit MarketEnvironmentMotivatingMotivating RealisticRealisticDistinctiveCompetenciesDistinctiveCompetenciesSpecificSpecificCharacteristicsof Good MissionStatementsCharacteristicsof Good MissionStatementsMissionStatementsMissionStatements
  19. 19. June 22, 2013 rijalcpr@gmail.com:9851105671 192. Objectives* What performance dimensions should thefirm’s business units and employees focuson?,* What is the target level of performance to beachieved on each dimension?, and* What is the timeframe in which each targetshould be attained?
  20. 20. June 22, 2013 rijalcpr@gmail.com:9851105671 20The Characteristics of Business ObjectivesEvery business objective should be:S = SpecificM = MeasurableA = AchievableR = RealisticT = Time-bounded
  21. 21. June 22, 2013 rijalcpr@gmail.com:9851105671 213. Development Strategy* How can the firm achieve the desired level ofgrowth over time?,* Can the desired growth be attained byexpanding the firm’s current businesses?, and* Will the company have to diversify into newbusinesses or product-markets to achieve itsfuture growth objectives?
  22. 22. June 22, 2013 rijalcpr@gmail.com:9851105671 224. Resources Allocation* How should the firm’s limited financialresources be allocated across its businessesto produce the highest returns? and* Of the alternative strategies that each businessmight pursue, which will produce the greatestreturns for the dollars invested?
  23. 23. June 22, 2013 rijalcpr@gmail.com:9851105671 235. Sources of Synergy* What competencies, knowledge, and customerbased intangibles (e.g., brand recognition,reputation, loyalty, etc.) might be developed andshared across the firm’s businesses? and* What operational resources, facilities, or functions(e.g., plants, R&D, salesforce, etc.) might the firm’sbusiness share to increase their efficiency?
  24. 24. June 22, 2013 rijalcpr@gmail.com:9851105671 24Levels of objectives and strategiesCorporate LevelCorporate Level: Grand strategies and grand objectives;corporate plansBusiness LevelBusiness Level: Strategic business unit or productcategory-wise strategies and objectives; businessdevelopment plansProduct/service levelProduct/service level : Bottom-line action programs todevelop and promote products and services; Tacticalaction plans;
  25. 25. June 22, 2013 rijalcpr@gmail.com:9851105671 25Role of CEO in strategic management Taking business risks making strategic decisions System visualization or system thinking Promoting institutional innovation, change anddevelopment Responding to environmental changes and takingcharge of organizational success or failure Responding with accountability and responsiveness
  26. 26. June 22, 2013 rijalcpr@gmail.com:9851105671 26Some Strategic Challenges to Managers:° Management has a distinctive and farsighted view,rather than a conventional and reactive view, aboutthe future.° Senior management focuses regenerating corestrategies rather than reengineering core processes.° Competitors view the company as a rule makerrather than a rule follower.° The company’s strength is on innovation andgrowth rather than on operational efficiency.° The company is mostly out in front rather thancatching up.
  27. 27. June 22, 2013 rijalcpr@gmail.com:9851105671 27Needs/Importance of Strategic ManagementDespite the involvement of high cost, strategicmanagement has the potential to:• Precipitate the concept of strategic choices,• Force a long-range view,• Make visible the resources allocation decision,• Aid strategic analysis and decision making,• Provide a strategic management and control system,• Provide both horizontal and vertical communicationand coordination systems, and• Help a business cope with changes.
  28. 28. June 22, 2013 rijalcpr@gmail.com:9851105671 28Unit II: External Environment AnalysesUnit II: External Environment Analyses1. Nature of environment: remote and operatingenvironment2. Process of environmental scanning3. Techniques of environmental analyses:PESTEL, Scenario planning, Porter’s FiveForces Model, environmental threat andopportunity planning (ETOP)
  29. 29. June 22, 2013 rijalcpr@gmail.com:9851105671 291.1. Nature of environment: remote andNature of environment: remote andoperating environmentoperating environment Basically, the business environment comprisesof micro and macro environment. The macro environment is referred to asremote environment and micro environment isreferred to as operating or internalenvironment. Please follow the detailed diagram developedin class.
  30. 30. June 22, 2013 rijalcpr@gmail.com:9851105671 302. Process of environmental scanning2. Process of environmental scanning
  31. 31. June 22, 2013 rijalcpr@gmail.com:9851105671 31Components and Process of Strategic Market ManagementStrategic AnalysisExternal Analysis1. Customer analysis2. Competitor analysis3. Market analysis4. Environmental analysisStrengths, weaknesses, stg. problems,constraints, and uncertaintiesOpportunities, threats, trends,and strategic uncertaintiesInternal Analysis1. Performance analysis2. Determinants of strategic optionsStrategy Identification and SelectionDetermination of Marketing StrategiesMarketing Planning, Implementation and Control
  32. 32. June 22, 2013 rijalcpr@gmail.com:9851105671 32Strategic AnalysisExternal AnalysisExternal Analysis1. Customer AnalysisCustomer Analysis: segmentation, consumermotivations, and unmet needs analysis.2. Competitor AnalysisCompetitor Analysis: identifying, evaluatingand dealing with competitors.3. Market AnalysisMarket Analysis: market size, market growth,market profitability, cost structure,distribution system, market trends, key factorsfor success, and risks in high growth markets.4. Environmental AnalysisEnvironmental Analysis: dimensions,forecasting environmental trends and events,analyses of strategic uncertainty, impact, andscenarios.Internal AnalysisInternal Analysis5. Performance analysesPerformance analyses: shareholder valueanalysis, sales and profitability analysis
  33. 33. June 22, 2013 rijalcpr@gmail.com:9851105671 333. Techniques of environmental analyses:PESTEL, Scenario planning, Porter’s FiveForces Model, environmental threat andopportunity planning (ETOP)
  34. 34. June 22, 2013 rijalcpr@gmail.com:9851105671 34PEST analysis• Political factors• Economic factors• Socio-cultural factors• Technological factors
  35. 35. June 22, 2013 rijalcpr@gmail.com:9851105671 35Political/legal• Monopolies legislation• Environmental protection laws• Taxation policy• Employment laws• Government policy• Legislation• Others?
  36. 36. June 22, 2013 rijalcpr@gmail.com:9851105671 36Economic Factors• Inflation• Employment• Disposable income• Business cycles• Energy availability and cost• Others?
  37. 37. June 22, 2013 rijalcpr@gmail.com:9851105671 37Socio-Cultural Factors• Demographics• Distribution of income• Social mobility• Lifestyle changes• Consumerism• Levels of education• Others?
  38. 38. June 22, 2013 rijalcpr@gmail.com:9851105671 38Technological Factors• New discoveries and innovations• Speed of technology transfer• Rates of obsolescence• Internet• Information technology• Others?
  39. 39. June 22, 2013 rijalcpr@gmail.com:9851105671 39SCENARIO ANALYSISScenario Analysis can be divided into four elements:• Identify Scenarios• Develop Scenario Strategies• Estimate Scenario Probabilities• Perform Regret Analysis
  40. 40. June 22, 2013 rijalcpr@gmail.com:9851105671 401. Identify ScenariosIt is important to reduce the number of scenarios byidentifying a small set that ideally includes thosethat are plausible/credible and those that representdepartures from the present that are substantialenough to affect strategy development.2. Develop Scenario StrategiesAfter scenarios have been identified, the next step isto relate them to strategies – both existing strategiesand new options.
  41. 41. June 22, 2013 rijalcpr@gmail.com:9851105671 413. Estimate Scenario Probabilities¤ To evaluate alternative strategies it is useful todetermine the scenario probabilities.¤ Experts could be asked to assess probabilitiesdirectly.4. Perform Regret AnalysisThe final step is to compare the expected outcomesof each strategy if the wrong scenario emerges.
  42. 42. June 22, 2013 rijalcpr@gmail.com:9851105671 42Forecasting Environmental Trends and Events• Asking the Right Questions• Trend Extrapolation• Asking Experts• Decomposing the Task• Cross-Impact Analysis
  43. 43. June 22, 2013 rijalcpr@gmail.com:9851105671 43Strategic Uncertainty¤ Strategic Uncertainty may result from a typicalexternal analysis or sometimes the strategicuncertainty is represented by a future trend or eventthat has inherent unpredictability.¤ To deal with strategic uncertainty, impact analysisand scenario analysis can be employed.
  44. 44. June 22, 2013 rijalcpr@gmail.com:9851105671 44Impact Analysis¤ The extent to which a strategic uncertainty shouldbe monitored and analyzed depends on its impactand immediacy.¤ The impact of a strategic uncertainty is related to:* The extent to which it will impact existing orpotential SBUs (strategic business units)* The importance of the involved SBUs* The number of involved SBUs.
  45. 45. June 22, 2013 rijalcpr@gmail.com:9851105671 45Impact Analysis contd . . .• The immediacy of a strategic uncertainty is relatedto- The probability that the involved trends orevents will occur.- The time frame of the trends or events.- The reaction time likely to be available,compared with the time required to developand implement appropriate strategy
  46. 46. June 22, 2013 rijalcpr@gmail.com:9851105671 46Managing Strategic UncertaintiesIf both the immediacy and impact are low, then alow level of monitoring may be appropriate.If the impact is thought to be low but the immediacyis high, then monitoring and analysis may beappropriate.If the immediacy is low and the impact high, thenmonitoring and analysis in more depth andcontingent strategies may be considered.When both the immediacy and potential impact ofthe underlying trends and events are high, then anin-depth analysis will be appropriate, as will be thedevelopment of reaction plans or strategies.
  47. 47. June 22, 2013 rijalcpr@gmail.com:9851105671 47Porter’s Five Forces AnalysisThreats of PotentialNew EntrantsCompetition AmongExisting FirmsBargainingPowerof SuppliersBargainingPowerof CustomersThreats ofSubstituteProducts
  48. 48. June 22, 2013 rijalcpr@gmail.com:9851105671 48Source: Adapted from M. E. Porter, Competitive Strategy, Free Press, 1980, p. 4. Copyright by TheFree Press, a division of Macmillan Publishing Co., Inc. Reproduced with permission.Threat ofThreat ofsubstitutessubstitutesPotentialentrantsThreat ofThreat ofentrantsentrantsSuppliersBargainingBargainingpowerpowerSubstitutesBuyersBargainingBargainingpowerpowerCOMPETITIVERIVALRYFive forces analysis
  49. 49. June 22, 2013 rijalcpr@gmail.com:9851105671 49The Threat of Entry ...Dependent on barriers to entry such as:• Economies of scale• Capital requirements of entry• Access to distribution channels• Cost advantages independent of size (eg the“experience curve”)• Expected retaliation• Legislation or government action• Differentiation
  50. 50. June 22, 2013 rijalcpr@gmail.com:9851105671 50Buyer power is likely to be high when:• There is a concentration of buyers• There are many small operators in thesupplying industry• There are alternative sources of supply• Components or materials are a highpercentage of cost to the buyer leading to“shopping around”• Switching costs are low• There is a threat of backward integration
  51. 51. June 22, 2013 rijalcpr@gmail.com:9851105671 51Supplier power is high when:• There is a concentration of suppliers• Switching costs are high• The supplier brand is powerful• Integration forward by the supplier is possible• Customers are fragmented and bargainingpower low
  52. 52. June 22, 2013 rijalcpr@gmail.com:9851105671 52Threat of SubstitutesSubstitutes take different for:• Substitution of need• Generic substitution• Doing without
  53. 53. June 22, 2013 rijalcpr@gmail.com:9851105671 53Competitive rivalry is high when:• Entry is likely• Substitutes threaten• Buyers or suppliers exercise control• Competitors are in balance• There is slow market growth• Global customers increase competition• There are high fixed costs in an industry• Markets are undifferentiated• There are high exit barriers
  54. 54. June 22, 2013 rijalcpr@gmail.com:9851105671 54Five Forces Analysis: Key Questions and Implications• What are the key forces at work in the competitiveenvironment?• Are there underlying forces driving competitiveforces?• Will competitive forces change?• What are the strengths and weaknesses ofcompetitors in relation to the competitive forces?• Can competitive strategy influence competitiveforces (eg by building barriers to entry or reducingcompetitive rivalry)?
  55. 55. June 22, 2013 rijalcpr@gmail.com:9851105671 55Unit III: Internal Environment AnalysesUnit III: Internal Environment Analyses1. Corporate resources analyses for strengths and weaknesses:marketing, HR, production and operations, finance andaccounting2. Process of corporate appraisal: concept of available resources,threshold resources, unique resources, core competencies,and strategic advantage3. Techniques for internal analyses: value chain analyses (costefficiency and product features)4. Comparative analyses: historical comparison, industrystandards, benchmarking, robustness, strategic advantageprofile (SAP)
  56. 56. June 22, 2013 rijalcpr@gmail.com:9851105671 56Internal AnalysisStructuring Strategic DecisionsOrganizationalstrengths andweaknessesEnvironmentalopportunitiesand threatsMarket needs, attractiveness,and key success factorsStrategic Decisions* Strategic investment decisions* Financial area strategies* Sustainable competitive advantages
  57. 57. June 22, 2013 rijalcpr@gmail.com:9851105671 57Internal AnalysisPerformance Analysis1. Shareholder Value Analysis2. Financial Performance - Sales and Profitability3. Performance Measurement - Beyond Profitability4. Determinants of Strategic Options5. From Analysis to Strategy6. Business Portfolio Analysis
  58. 58. June 22, 2013 rijalcpr@gmail.com:9851105671 58Why Do Companies Fail?What went wrong?– Inertia (resistant to change)– Prior strategic commitments– The icarus paradoxAvoiding failure andsustaining competitiveadvantage:– Focus on the building blocks ofcompetitive advantage.– Institute continuous improvementand learning.– Track best industrial practice anduse benchmarking.– Overcome inertia.
  59. 59. June 22, 2013 rijalcpr@gmail.com:9851105671 59Shareholder Value AnalysisHow competent the firm is to create various valuesto shareholdersKey values to the shareholder are:1. Profit maximization, and1. Profit maximization, and2. Increment of worth of the share per unit2. Increment of worth of the share per unitOther important values to the shareholders may beBusiness/product diversificationGoodwillBrand recognition, and so on ….
  60. 60. June 22, 2013 rijalcpr@gmail.com:9851105671 60Competitive Advantage: Value Creation, Low Cost,and Differentiation• Competitive advantage is a firm’s ability tooutperform its competitors (earn higher profits).• The source of competitive advantage is valuecreation for customers.• Sustained competitive advantage comes frommaintaining higher profits than competitors overlong periods of time.• Sustained competitive advantage leads to highershareholder value.
  61. 61. June 22, 2013 rijalcpr@gmail.com:9851105671 61Value Creation
  62. 62. June 22, 2013 rijalcpr@gmail.com:9851105671 62Financial Performance - Sales and ProfitabilityThe Determinants1. Sales and Market Share2. Profitability3. Good Performance4. Economic Value Added
  63. 63. June 22, 2013 rijalcpr@gmail.com:9851105671 63Return on Capital Employed for Selected U.S.Department Stores, 1989-1998Source: Data from Value Line Investment Survey
  64. 64. June 22, 2013 rijalcpr@gmail.com:9851105671 64Performance Measurement - Beyond ProfitabilitySome Indicators1. Customer satisfaction and brand loyalty2. Product service quality3. Brand and firm associations4. Relative costs5. New product activity6. Manager/employee capability and performance
  65. 65. June 22, 2013 rijalcpr@gmail.com:9851105671 65Performance Measurement Beyond ProfitabilityIt is very important to develop performanceindicators that convincingly represent the long termprospect.Customer satisfaction/brand loyalty are the keysIt indicates how customers really feel about the firm.
  66. 66. June 22, 2013 rijalcpr@gmail.com:9851105671 66Guidelines for measuring satisfaction and loyalty problems and causes of dissatisfaction should beidentified exit interviews should be taken size and intensity of the customer group that truly likes abrand should be known. measures should be trackedPerformance Measurement Beyond Profitability
  67. 67. June 22, 2013 rijalcpr@gmail.com:9851105671 67Product and service quality how good a value it is? can it really deliver superior performance? how does it compare with competitor offerings? how will it compare with competitor offerings in the futuregive competitive innovations?Performance Measurement Beyond Profitability
  68. 68. June 22, 2013 rijalcpr@gmail.com:9851105671 68performance measurement• brand/firm associations what are its associations? what is the perceived quality?• relative cost• average costing in average costing some elements of fixed or semivariable costs are not carefully allocated butinstead are averaged over total production
  69. 69. June 22, 2013 rijalcpr@gmail.com:9851105671 69performance measurement• new product activity• manager/employee capability andperformance human factor is very important as they are theones who implement the strategies does the human resource support the current andfuture strategies? does new employees match the needs of theorganization?
  70. 70. June 22, 2013 rijalcpr@gmail.com:9851105671 70Generic Building Blocks of Competitive Advantage
  71. 71. June 22, 2013 rijalcpr@gmail.com:9851105671 71Generic Building Blocks of Competitive Advantage:EfficiencyEfficiency = Outputs/InputsFor many firms, EE productivity is key (output peremployee)Increased efficiency requires strategy, structure andcontrols (and a strong functional production oroperations program)Efficiency is “critical” for cost leaders (eg. Wal-Mart) but still very important for others
  72. 72. June 22, 2013 rijalcpr@gmail.com:9851105671 72Competitive Advantage: Customer Responsiveness• Superior Customer Responsiveness is a functionof:Quality, andInnovation in design, service, etc.• Often measured by:Response time, andAdaptability
  73. 73. June 22, 2013 rijalcpr@gmail.com:9851105671 73Competitive Advantages: Innovation• Perhaps the most important building block ofcompetitive advantage: may drive greater innovationleading to higher prices via differentiation or simplybetter processes leading to lower costs.• Companies can’t afford to sit still• Innovation includes advances in products,processes, management systems, organizationalstructure, strategies, etc
  74. 74. June 22, 2013 rijalcpr@gmail.com:9851105671 74Competitive Advantage: Quality• Quality drives profits in two ways:Increased reliability which leads to higher pricesdue to perceived higher qualityIncreased productivity due to lower re-work,returns and rejection rates leading to lower costs(zero defects)• Higher prices plus lower costs means more profits
  75. 75. June 22, 2013 rijalcpr@gmail.com:9851105671 75Choice of functional strategy and policies
  76. 76. June 22, 2013 rijalcpr@gmail.com:9851105671 76The Impact of Efficiency, Quality, Innovation, andCustomer Responsiveness on Unit Costs and Prices
  77. 77. June 22, 2013 rijalcpr@gmail.com:9851105671 77Figure misses the role played by finance and accounting/Information systemsas support servicesThe Value Chain (Business Functions)
  78. 78. June 22, 2013 rijalcpr@gmail.com:9851105671 78Distinctive Competencies, Resources, and CapabilitiesThe roots of competitive advantage
  79. 79. June 22, 2013 rijalcpr@gmail.com:9851105671 79Strategy and Competitive AdvantageThe relationship between strategies and resources andcapabilities:
  80. 80. June 22, 2013 rijalcpr@gmail.com:9851105671 80Strategic Resources: Two Types• Tangible– Land– Buildings– Plant– Equipment• Intangible– Brand names– Reputation– Patents– Technological ormarketing know-how
  81. 81. June 22, 2013 rijalcpr@gmail.com:9851105671 81Resources and CapabilitiesSkills in effectively coordinating and managingresources for productive use.– UniqueUnique resources and capabilities, or, at aminimum,– CommonCommon resources andunique capabilitiescapabilities– Best if have both.
  82. 82. June 22, 2013 rijalcpr@gmail.com:9851105671 82The Durability of Competitive Advantage• Barriers to imitation (Slows the speed of imitation bycompetitors in reducing advantage)– Imitation by acquiring similar resources– Imitation of capabilities (more difficult)• Limits on competitors– Prior strategic commitments– Absorptive capacity for change• Industry dynamism– The rapid innovationshortens product life cycles.
  83. 83. June 22, 2013 rijalcpr@gmail.com:9851105671 83Durability of Competitive Advantage• Durability is dependent upon:- height of barriers to imitation- capability of competitors to imitate innovation- general level of industry dynamism
  84. 84. June 22, 2013 rijalcpr@gmail.com:9851105671 84Analysis of Strategic OptionsDeterminants of Strategic OptionsDeterminants of Strategic Options1. Past and current strategies2. Strategic problems3. Organizational capabilities and constraints4. Financial capabilities and constraints5. General strengths and weaknesses
  85. 85. June 22, 2013 rijalcpr@gmail.com:9851105671 85Business Portfolio AnalysisThe Components1. The Market Attractiveness - Business PositionMatrixa. Evaluate the abilities to competeb. Evaluate the market attractiveness
  86. 86. June 22, 2013 rijalcpr@gmail.com:9851105671 86business portfolio analysis• it provides a structured way to evaluate businessunits on two key dimensions• attractiveness of the market involved and• strength of the firms position in that market• the market attractiveness-businessposition matrix it is a formal, structured way to match a firm’sstrength and market opportunities.
  87. 87. June 22, 2013 rijalcpr@gmail.com:9851105671 87business portfolio analysis• Applying the matrix• logical alternatives in structuring strategies invest to bold invest to penetrate invest to rebuild selective investment• The BCG Growth Share Matrix.
  88. 88. June 22, 2013 rijalcpr@gmail.com:9851105671 88Unit IV: Strategic Options1. Generating alternative strategies using SWOT analyses2. Corporate strategies: stability, growth (related and unrelateddiversification), retrenchment strategies3. Porter’s competitive strategies4. Strategy clock (low price, differentiation, hybrid, focuseddifferentiation, and failure strategies)5. Sustainable competitive advantages (SCAs)6. Comparative collaborative strategies7. Directions for strategy development: consolidation, marketpenetration, product development, market development anddiversification8. Methods of strategy development: internal development,mergers and acquisition, joint-venture and strategic alliances
  89. 89. June 22, 2013 rijalcpr@gmail.com:9851105671 89SWOT Analysis• Strengths (internal)• Weaknesses (internal)• Opportunities (external)• Threats (external)
  90. 90. June 22, 2013 rijalcpr@gmail.com:9851105671 90SWOT ANALYSISThe Components of SWOT AnalysisSWOTAnalysisInnovationFinancingAccess toCapitalMarketingCustomerBaseManagementManufacturing
  91. 91. June 22, 2013 rijalcpr@gmail.com:9851105671 91SWOT ANALYSISInnovationTechnical or product/service superiorityR&DNew product capabilities and new technologiesPatentsManufacturingCost structureProduction flexibility and capacityEquipmentAccess to raw materialsVertical integrationWorkforce attitude and motivation
  92. 92. June 22, 2013 rijalcpr@gmail.com:9851105671 92SWOT ANALYSISFinanceFrom operationsFrom net short-term assetsAbility to use debt and equity financingParent’s willingness to financeManagementTop and middle management qualityOrganizational culture, strategy, goals, plans, tacticsKnowledge, skill, capabilityEmployee motivation and turnoverQuality of strategic decision-making
  93. 93. June 22, 2013 rijalcpr@gmail.com:9851105671 93SWOT ANALYSISMarketingProduct quality, brand image, differentiationCustomer focus, service and supportQuality of segmentationProduct line length, depth, width, and capabilityMarket networks and relationshipSales force motivation and loyaltyCustomer BaseSize or market share, loyaltyGrowth of segments served
  94. 94. June 22, 2013 rijalcpr@gmail.com:9851105671 94Generic Building Blocks of Competitive Advantage
  95. 95. June 22, 2013 rijalcpr@gmail.com:9851105671 95The Impact of Efficiency, Quality, Innovation, and CustomerResponsiveness on Unit Costs and Prices
  96. 96. June 22, 2013 rijalcpr@gmail.com:9851105671 96Comparative Collaborative Strategies In collaborative strategies, the firms withsimilar interests or having similar strengthswork together to consolidate their strengths soas to counter the threats or take benefits of theprevailing opportunities by the help ofcollective efforts. In most of such instances, the firms intend totake benefits of their comparative strengths.
  97. 97. June 22, 2013 rijalcpr@gmail.com:9851105671 97Directions for strategy developmentDirections for strategy developmentConsolidationConsolidation is a strategic direction in which a firm attempts toconsolidate its entire efforts and resources in one or twoofferings at a time so as to perform the best in the category.In market penetrationmarket penetration, the firm applies very low cost strategyand attempts to reach every corner of the marketplace so as tooccupy a comfortable market share, mostly in the case of newlaunch consumer goods and other convenience items.Product development follows a process of developing newproduct or making some changes in existing product afterexperiencing negative effect of product life cycle maturity, mostof the cases.
  98. 98. June 22, 2013 rijalcpr@gmail.com:9851105671 98Directions for strategy developmentDirections for strategy developmentMarket developmentMarket development strategy seeks exploringnew markets for existing product offerings byconverting the non-users into users orexploring into completely new marketsegments.DiversificationDiversification refers to simply expansion, andexpansion may take place at product and/ormarket level.
  99. 99. June 22, 2013 rijalcpr@gmail.com:9851105671 99Methods of strategy developmentMethods of strategy developmentInternal developmentInternal development refers to internally strengthening the firmby means of research, innovation, new product developmentand strategy revisits.Mergers and acquisitionMergers and acquisition is another popular mode of strategicdevelopment whereby the firm gets itself strengthened eitherby getting merged with other firm/s, and acquiring other firmsinto self.Joint-ventureJoint-venture is another mode of strategic strengtheningwhereby an existing firm joins hands with national orinternational venture partners.In strategic alliancesstrategic alliances, the firms with similar interests andoperating specializations join hands together for somepurpose.
  100. 100. June 22, 2013 rijalcpr@gmail.com:9851105671 100Unit V: Strategy Evaluation and Choice1. Evaluation criteria: suitability, acceptability(return on risk and stakeholder reaction), andfeasibility.2. Portfolio analyses for strategic choices: BCGgrowth share matrix, GE business screen,Hofer’s product market evolution matrix3. Choices of functional strategies and policies
  101. 101. June 22, 2013 rijalcpr@gmail.com:9851105671 101Evaluation Criteria While evaluating the strategic development andexecution, we must pay attention on potential risk andreturn associated to the business. Suitability and acceptability of the firm and its offeringalso need be assessed from the perspectives of theinvestor, maker and marketer. We also should assess the general reaction pattern ofthe key internal and external stakeholders. Finally, social, financial and developmental feasibilityalso need to be made one of the bases.
  102. 102. June 22, 2013 rijalcpr@gmail.com:9851105671 102Portfolio Analyses for Strategic Choices1. BCG growth share matrix,2. GE business screen,3. Hofer’s product market evolution matrix
  103. 103. June 22, 2013 rijalcpr@gmail.com:9851105671 103BCG growth share matrix1. xx
  104. 104. June 22, 2013 rijalcpr@gmail.com:9851105671 104BCG growth share matrix1. xx
  105. 105. June 22, 2013 rijalcpr@gmail.com:9851105671 105BCG growth share matrix
  106. 106. June 22, 2013 rijalcpr@gmail.com:9851105671 106BCG growth share matrix1. xx
  107. 107. June 22, 2013 rijalcpr@gmail.com:9851105671 107BCG growth share matrix1. xx
  108. 108. June 22, 2013 rijalcpr@gmail.com:9851105671 108BCG growth share matrix1. xx
  109. 109. June 22, 2013 rijalcpr@gmail.com:9851105671 109GE business screen1. GE
  110. 110. June 22, 2013 rijalcpr@gmail.com:9851105671 110GE business screen1. GE
  111. 111. June 22, 2013 rijalcpr@gmail.com:9851105671 111GE business screen1. GE
  112. 112. June 22, 2013 rijalcpr@gmail.com:9851105671 112GE business screen1. GE
  113. 113. June 22, 2013 rijalcpr@gmail.com:9851105671 113GE business screen1. GE
  114. 114. June 22, 2013 rijalcpr@gmail.com:9851105671 114Hofer’s product market evolution matrix
  115. 115. June 22, 2013 rijalcpr@gmail.com:9851105671 115Hofer’s product market evolution matrix
  116. 116. June 22, 2013 rijalcpr@gmail.com:9851105671 116Choice of functional strategy and policies
  117. 117. June 22, 2013 rijalcpr@gmail.com:9851105671 117Choice of functional strategy and policies
  118. 118. June 22, 2013 rijalcpr@gmail.com:9851105671 118Choice of functional strategy and policies
  119. 119. June 22, 2013 rijalcpr@gmail.com:9851105671 119Choice of functional strategy and policies
  120. 120. June 22, 2013 rijalcpr@gmail.com:9851105671 120Choice of functional strategy and policies
  121. 121. June 22, 2013 rijalcpr@gmail.com:9851105671 121Unit VI: Strategy Implementation and ControlUnit VI: Strategy Implementation and Control1.Process of Strategy implementation2.Organizational structure for strategyimplementation3.Managing strategic change4.Strategic control
  122. 122. June 22, 2013 rijalcpr@gmail.com:9851105671 122Process of Strategy implementation
  123. 123. June 22, 2013 rijalcpr@gmail.com:9851105671 123Process of Strategy implementation
  124. 124. June 22, 2013 rijalcpr@gmail.com:9851105671 124Process of Strategy implementation
  125. 125. June 22, 2013 rijalcpr@gmail.com:9851105671 125Organizational structure for strategyimplementationHere, you should briefly review the various typesof organizational structures and relate therelevant functional strategies per structuraldesign.
  126. 126. June 22, 2013 rijalcpr@gmail.com:9851105671 126Managing strategic change
  127. 127. June 22, 2013 rijalcpr@gmail.com:9851105671 127Managing strategic change
  128. 128. June 22, 2013 rijalcpr@gmail.com:9851105671 128Managing strategic change
  129. 129. June 22, 2013 rijalcpr@gmail.com:9851105671 129Managing strategic change
  130. 130. June 22, 2013 rijalcpr@gmail.com:9851105671 130Managing strategic change
  131. 131. June 22, 2013 rijalcpr@gmail.com:9851105671 131Strategic control
  132. 132. June 22, 2013 rijalcpr@gmail.com:9851105671 132Strategic control
  133. 133. June 22, 2013 rijalcpr@gmail.com:9851105671 133Strategic control
  134. 134. June 22, 2013 rijalcpr@gmail.com:9851105671 134Strategic control
  135. 135. June 22, 2013 rijalcpr@gmail.com:9851105671 135Components and Process of Strategic Market ManagementStrategic AnalysisExternal Analysis1. Customer analysis2. Competitor analysis3. Market analysis4. Environmental analysisStrengths, weaknesses, stg. problems,constraints, and uncertaintiesOpportunities, threats, trends,and strategic uncertaintiesInternal Analysis1. Performance analysis2. Determinants of strategic optionsStrategy Identification and SelectionDetermination of Marketing StrategiesMarketing Planning, Implementation and Control
  136. 136. June 22, 2013 rijalcpr@gmail.com:9851105671 136Strategic AnalysisExternal AnalysisExternal Analysis1. Customer AnalysisCustomer Analysis: segmentation, consumermotivations, and unmet needs analysis.2. Competitor AnalysisCompetitor Analysis: identifying, evaluatingand dealing with competitors.3. Market AnalysisMarket Analysis: market size, market growth,market profitability, cost structure,distribution system, market trends, key factorsfor success, and risks in high growth markets.4. Environmental AnalysisEnvironmental Analysis: dimensions,forecasting environmental trends and events,analyses of strategic uncertainty, impact, andscenarios.Internal AnalysisInternal Analysis5. Performance analysesPerformance analyses: shareholder valueanalysis, sales and profitability analysis

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