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Strategic management

Strategic management

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  • 1. Str ate gicmanagement
  • 2. General management vs. strategic managementGeneral management: Is the process of acheiving organizational goal by engaging in four major functions of planing, organizing, leading and contolring.  Bartol, Kathryn m 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin GM concerns about the process to manage the company internally – (operational effectiveness), GM is not focusing on exploring competitiveness in relation to ext. envir. GM does not include the strategyStrategic management: Strategy is focusing on the competitivness of the company by performing different activities from rivals or performing similiar activities in different ways  Porter, Michael E. 1996. What is Strategy? Harvard Business Review. Nov/Dec 1996. Strategic management is the process of 3 primary activities: 1. Formulation: Organization Mission, Competitive Situations, Strategy Development 2. Implementation: Organization alignment that should be considered for changing the organization to support the operations based on the formulated strategies 3. Controling and Evaluation: financial perspective, customer perspective, internal process perspective, and learning and growth perspective.  Suksriwong, Sakorn 2007, Management : From the Executive’s Viewpoint, Bangkok
  • 3. What is the strategy? Ethymological fundament - Greek language “stratçgos”; „Stratus“ – army, „ago” – move, run, lead "Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expect“  Johnson and Scholes (Exploring Corporate Strategy) Direction: Where is the business trying to get to in the long-term? Scope of act. : Which markets should a business compete in and what kind of activities are involved in such markets? Advantage: How can I perform the business better than the others? Resources: What resources are abilities are required? Environment: What external environmental factors affect the ability to compete? Stakeholders: What are the values and expectations of those who have power?
  • 4. Strategy definitions: The Strategy is over the space and the time tactical and purpose-build configuration and exploration of organizational resources, planed and managed based on actual, planed and forecasted conditions of the internal and external environment of the organization, providing most efficient way for organizational objectives achievements, with limited or acceptable consequences from third parties reactions.
  • 5. Strategic managementprocess
  • 6. Strategy formulation
  • 7.  Strategy formulation:  Mission statement:  Reason / reasons to exist  Scope of operations  Analysing the situation (how particular factors support or depress the organization) :  External Environment (factors):  Macro environment  National competetiveness (2BCognituss Wiena, De Deught Swizerland)  Industry attractiveness External analysis builds on an economics perspective of industry structute and how a firm can make the most of competing in trhat structure.  Internal Environment (factors):  Correlation among the organization activities and business functions  Core competencies of the organization exploration The internal analysis based on operation activities and its competencies with in the organization.  Set of strategies that gain supportive environments and prevent obstructive factors  Grand strategy (corporate strategy) – growth, stabilisation, exit  Business strategy – differentiation (by value, by price)  Functional strategy – related to the business functions of the company
  • 8. Basic methods for strategic analyses  Mission - Evaluation sheet method  External Environment:  Macro Environment – 5 major functions model  National Competitiveness - The Diamond of National Advantage  Industry Attractiveness - 5 forces model  Internal analysis:  Value Chain Analysis,  Business Function Analysis,  Core Competencies Analysis.
  • 9. Organization Mission The organization’s purpose or fundamental reason for existence, expressed by Mission statement Broad declaration of the basic, unique purpose and scope of operations that distinguish the organization from other of it type.  Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin. 9 components to formulate mission statement: 1. Customers - Who are the organization’s customers? 2. Products or services. What are the organization’s major? 3. Location. Where does the organization compete? 4. Technology. What is the firm’s basic technology? 5. Concern for survival. What is the organization’s commitment to economic objectives? 6. Philosophy. What are the basic belief, values, aspirations, and philosophical priorities of the organization? 7. Self-concept. What are the organization’s major strengths and competitive advantages? 8. Concern for public image. What are the organization’s public responsibilities,and what image is desired? 9. Concern for employees. What is the organization’s attitude toward its employees?
  • 10. Concern for Self-concept. Concern for public imageStarbucks Concern for Employeeso Technology. Philosophy. Products or Customers. Location. ServicesMissions and SurvivalComponentsThe premier purveyor of thefinest coffee in the world while X X X X Xmaintaining our uncompromisingprinciples as we grow.Provide a great workenvironment and treat each X Xother with respect and dignityEmbrace diversity as anessential component in the way Xwe do business.Apply the highest standards ofexcellence to the purchasing, X Xroasting and fresh delivery ofour coffee.Develop enthusiastically Satisfiedcustomers all of the time XContribute positively to our Xcommunities and our EnvironmentRecognize that profitability is Zdroj: Internetové materiály spoločnosti Starbucks
  • 11. Macro Environment C ompetitive situation: affects overall of the business situation. Consideration of 5 major factors as the information for developing the strategy according to the host country :  Legislation and Regulations,  General Economic Conditions,  Societal Values and Lifestyles,  Population Demographics,  Technology
  • 12. PEST Analysis: •external analysis that investigates four macro-environment factors: Political Economic Social Technology Political Banking system Dominant religion R&D activities stability Interest rates Minorities Automation Tax policies Exchange rates Attitude towards Technology Tariffs Earning per foreign products incentives Regulations capita Leisure hours Justice system Gross Domestic Education Product (GDP) Working skills Inflation rate Age distributionSupports better understanding the risk and pitfalls for the environment you operate in.Good tool to identify macro-environment level opportunities and threats in SWOTCan be combined with SWOT
  • 13. 4P4C Analysis: Product Price Promotion Place Feature and Customer Suitable pricing Moste desiredConsumer. qualities of responded schemes sales channel product wanted promotion Pricing Product Competitors schemes Types ofCompetitor features offerd sales eployed by promotion by competition channels competitors Features and Current Current pricing Current salesCompany qualities offerd promotion strategies chanels by company plan Pricing Community Favourable Allowed strategiesCommunity Features promotion distribution encouraged Pathers strategies channels and supported•Anables to: •refine company’s current marketing mix in respect with consumer needs, •respond to competitors’ actions, •know the limitations for various strategies within the community.
  • 14. NationalCompetitiveness: the company should analyze the competiveness in the state level in order to find the opportunities and threats influenced on the industry that firm challenges national competitiveness is created and sustained through a highly localized process. It differences in national values, culture, economic structures, institutions, and histories all contribute to competitive success. The Diamond of National Advantage: 1.Factor Conditions. The nation’s position in factors of production, such as skilled labour or infrastructure, necessary to compete in a given industry. 2.Demand Conditions. Home-market demand for the industry’s product or service. 3.Related and Supporting Industries. The presence or absence in the nation of supplier industries and other related industries that are internationally competitive. 4.Firm Strategy, Structure and Rivalry. The conditions in the nation governing how companies are created, organized, and managed, as well as the nature of domestic rivalry.
  • 15. Thailand National Competitiveness
  • 16. Thai Automotive Competitiveness
  • 17. Industry Attractiveness - 5 forces modelPorter, Michael E. 2008, “The Five Competitive Forces That Shape Strategy”, HarvardBusiness Review, January 2008Vertical line:•Is about the competition in the certain industry regarding 3 factors; •Industry Competitors, •New Entrants, •Substitutes Horisontal line: •Iis about the industry operation showing the correlation among: • suppliers, producers, • merchandises, and buyerss
  • 18. Korean Cosmetics Attractiveness1. Rivalry among competitors: High- Large number of brands in the mkt.- Industry growth: + 3.4% over 2006- Low product differences2. Rarriers to entry: High- Brand Identity preferencees- Government restrictions- Large nubmer of brands in the mkt.3. Threat of substitutes: Low- Substituted product avalaiability4. Bargaining power of suppplier: Moderate- Differentiation of input- Impacct of inputs on costs- Threath of forward integration5. Bragaining power of buyer: High- Buyers needs- Market size- Brand Identity- Product differentiation
  • 19. Value Chain Analysis Porter, Michael E. 1985, How Information Gives You Competitive Advantage, Free Press, New York a systematic tool to analyze the interaction among all the activities a firm performs it emphasizes that competitive advantage can come not just from great products or services, but from anywhere along the value chain it is also important to understand how a firm fits into the overall value system, which includes the value chains of its suppliers, channels, and buyers. This concept divides a company’s activities, value activities, into the technology and economically distinct activities it performs to do business.
  • 20. Malaysian national airline valuechain analysis
  • 21. Business functionsanalysis:  tools to investigate the organization performance by focusing on organizvational functions,  Examples:  Marketing analysis – investigation about companies market share, customer satisfaction, customer preferencees  Productions analysis – investigation about productivity product quality, ...  Human resource management analysis – investigation about personel competencies, organizational structure, ...  Finantial analysis – investigation about profitability and liquidity
  • 22. Core Competencies Analysis: Bartol, Kathryn M 2006, Management: A Pacific Rim Focus, McGraw-Hill/Irwin Exmination of the resources, capabilities and competencies which are considered as a major and most importat ones in the organization. „CC’s“ are:  Variouse assets of the company, which are different from competitors ones, and is difficult to distinguish and imitate them. F.e.:  Financial resources: debt, equity, retained earnings, money reserves.  Physical resources: buildings, machinery, vehicles, raw materials.  Human resources: skills, abilities, experience, organiyational chart.  part of highly protected know-how of the company  supposed to be the fountain of the organizational competetive advantage  collective learning in the organization how to coordinate diverse production skills and integrate multiple streams of technology.  Company should identify the organization regarding 3 factors;  a potential access to wide variety of markets,  a significant contribution to end user value,  difficulty for competitors to imitate  Examples:  Sony - miniaturization.  Canon - microprocessor controls copiers, printers, cameras, and image
  • 23. SWOT Analysis: The tool to classify the environment effecting the organization by identification of internal and external factors with the favourable and unfavourable impact to the organization, dividing them in to 4 groups: 1. Strengths - organization’s strong points in internal environment, comming from resources and competencies available within the organiyation, with a potential to create a competetive advantage 2. Weaknesses - organization’s weak points in internal environment, comming from resources and competencies available within the organiyation, with a potential a competetive disadvantage 3. Opportunities – acciedntal external invironment factors with the potential to support organization activities. 4. Threats – acciedntal external invironment factors with the potential to diminish organization activities ADVANTAGE DISADVANTAGE INTERNAL ENVIRONMENT Strengths Weaknesses EXTERNAL ENVIRONMENT Opportunities Threats STRATEGIC ACTION Move on, GO! Protect, Improve, Quit
  • 24. Misterious SWOT history? 1960-1970, Albert Humphrey, Stanford University, research project US Fortune 500. Humphrey developed Team Action Model (TAM) - a management concept that enables groups of executives to manage change. SWOT was to have originated from his ‘Stakeholders Concept and SWOT Analysis.’ 1960, Harward University (Haberberg, 2000) 1987, Igor Ansoff, Ansoff’s Matrix fame (Turner (2002) Existed publications relates names to SWOT rather users then inventors (http://www.marketingteacher.com/swot/history-of-swot.html).  Koch (2004) comments he recognised that a series of SWOT/TOWS analyses had the advantages of a single arbitrary matrix.  Wheelan and Hunger (1998) used SWOT to look for gaps and matches between competences and resources and the business environment.  Dealtry (1992) considered SWOT in terms or groups and vectors with common themes and interactions.  Shinno et al (2006) amalgamated SWOT analysis with an Analytic Hierarchy Process (AHP) which ranked and prioritised each element using software.
  • 25. Strengths: 1. Advantages of proposition? 2. Capabilities? 3. Competitive advantages? 4. Marketing - reach, distribution, awareness? 5. Innovative aspects? 6. Location and geographical? 7. Price, value, quality? 8. Accreditation, qualifications, certifications? 9. USPs (unique selling points)? 10.Resources, Assets, People? 11.Experience, knowledge, data? 12.Financial reserves, likely returns? 13.Processes, systems, IT, communications? 14.Cultural, attitudinal, behavioral? 15.Management cover, succession?
  • 26. Weaknesses: 1. Disadvantages of proposition? 2. Gaps in capabilities? 3. Lack of competitive strength? 4. Reputation, presence and reach? 5. Financials? 6. Own known vulnerabilities? 7. Timescales, deadlines and pressures? 8. Reliability of data, plan predictability? 9. Morale, commitment, leadership? 10.Accreditation, etc? 11.Cashflow, start-up cash-drain? 12.Continuity, supply chain robustness? 13.Effects on core activities, distraction? 14.Processes and systems, etc? 15.Management cover, succession?
  • 27. Opportnities: 1. Market developments? 2. Competitors vulnerabilities? 3. New USPs? 4. Tactics - surprise, major contracts, etc? 5. Business and product development? 6. Information and research? 7. Partnerships, agencies, distribution? 8. Industry or lifestyle trends? 9. Technology development and innovation? 10.Global influences? 11.New markets, vertical, horizontal? 12.Niche target markets? 13.Geographical, export, import? 14.Volumes, production, economies? 15.Seasonal, weather, fashion influences?
  • 28. Threats:1. Political effects?2. Legislative effects?3. Obstacles faced?4. Insurmountable weaknesses?5. Environmental effects?6. IT developments?7. Competitor intentions - various?8. Loss of key staff?9. Sustainable financial backing?10.Market demand?11.New technologies, services, ideas?12.Vital contracts and partners?13.Sustaining internal capabilities?14.Economy - home, abroad?15.Seasonality, weather effects?
  • 29. HP SWOT  Opportunities: Analysis:  Cloud computing market  The global spending on cloud computing is forecast Strenghts: to cross a value of over $40 billion by 2012  Bratislava – center for cloud computing  Brand name  Printing solutions:  11th most recognizable brand  commercial printing and capturing high-value pages  40% MKT over world share in printer for industrial applications, outdoor signage, and graphic arts market  3D printing  30% MKT over world shere in server market  Threats:  Strategic allaiences:  over world IT MKT recession:  Compaq Computer Corporation in  8% decline by 2011 worldwide 2002,  Worldwide economical recession  Mercury Interactive in 2006  Severe competition in consumer goods market  Electronic Data Systems  Dell, Toshiba, Lenova Group and Aver – all of them Corporation (EDS) in 2008. worldwide  3Com in 2009  Lots of l ocal competitors  Thomson eXimius  Severe competition in core business market:  IBM, EMC Corporation, Dell (standard servers) Sun Microsystems (UNIX-based servers), Weaknesses:  Canon USA, Lexmark International, Xerox Corporation, Seiko Epson Corporation, Samsung  MKT segment integration: Electronics and Dell – in printing and imaging  Lack of particular SW products  Lack of management consulting servicies  Complicated organiyational structure  High labor costs
  • 30. POWER SWOT: P – Personal experience  Explore own personal and profesional experience O – Order  Distinguish between  Strengths and opportunities  Threats and weaknesses  The opportunity can become the threat and v.v. W – Weighting  Weight SWOT elements.  Count final weight of SWOT part E – Emphasize detail  Every element (factor) should be preciselly described, reasoned and justified by expected conseqencees. R – Ranking  Give the SWOT analysis the strategic meaning by ranking and prioritizing factors  Rephrase threats as opportunities and find out how to turn weaknesses in to strengths (Use Gap Analysis)
  • 31. GAP Analysis
  • 32. External & Internal factors evaluation matrix:
  • 33. Value chain SWOTanalysis: SALES MKT HRM Produciton Warehouse LogisticsSWOT
  • 34. SWOT Diagram Software
  • 35. The GE/McKinsey Matrix A sort of portfolio analysis used for classifying product lines or strategic business Developed by McKinsey for General Electrics Criteria for the business areas assessment:  The attractiveness of the industry/market concerned  The strength of the business Vertical axis:  Industry attractiveness  Explains the attrectiveness to a firm of entering, remaining or quiting of particular industry, based on particular factors of the industry Horisontal axis:  Strength of the business unit – how strong the SBU is in terms of the market  Explain the strengths of the company in terms of supplying the market
  • 36. BCG Analysis Growth-share matrix
  • 37. BCG matrix versus GE matrix Similarities:  The focus is the future strategy for the particular area of the business  Two dimensions and usually three levels at each dimension Differences  Dimensions are.  Industry attractiveness (instead market share)  Business strength (instead market growth)  Each cell represents particular strategy – more strategies to choose  BSG is focusing on products within the company, GE is focusing on a strategic business units.  SBU:  The particular market portfolio with own business plan  Part of the company with own market and target group  The company unit with responsibility for strategic management of particular product  The organizational part of the company BCG is part of GE matrix.  Market growth is an element of industry attractvness  Market growth is an element in business strength
  • 38. Market attractivenesscriteria  Market Size  Availability of:  Market Growth  Market intelligence  Work force  Sector profitability  Other resources  Profit margins  Infrastructure  Overall returns of  Global opportunities industry  Bank system  Industry fluctuation  Legal system  Variabiliyty of  Political system demand  Natural resources  Entry and exit barriers  Regulatory policy
  • 39. SBU internal strengthscriteria: Market share  Marketing: (MS)  Skills  Distribution network Growth in MS  Sales force Product  Management: uniqueness  Competence, skills Company image  Work force skills  Service quality Brand recognition  Production: Customer loyalty  Capacity SBU reliability  Flexibility  Costs/Profitability  Quality
  • 40. GE / McKinsey SBU internal strength Matrix High Medium Low M High attractiveness X1 Y2 Y3 A R Medium attractiveness Y4 Y5 Y6 K Low attractiveness E T Y7 Y8 Z9 X– Successful SBU – strong business, attractive industry Y – Mediocre SBU – medium business, industry less attractive Z – Disappointing SBU – weak business, unattractive business1 – Protect position 4 – Harvest 7 – Reorganize2 – Motivation 5 – Think over 8 – Reorg/Harv3 - Reorganisation 6 – Invest 6 – Quit Grow - Strong SBU units in attractive business -Strong SBU in average business or in attractive business Hold -Strong SBU in weak business -Average SBU in average business -Weak SBU in attractive business Quit -Average SBU in unattractive business -Weak SBU in average business or in unattractive business
  • 41.  Cell no.1:  Highly attractive market & hight SBU strength  Invest for other growth, Search for global opportunities, Maximise market share, Seek market dominance, Secure position, Cells 2, 4:  SBU strength and industry attractiveness are in high rating in one, and medium in the other.  Invest for growth, Invest to expand, Search for new segments, Invest to maintain sompetitiveness, Invest to motivate Cells 3,5,7:  The level of the SBU is balanced by market attractiveness  Invest for earnings, Invest selectively, Maintain position, Defend position, Conctentrate for selected segments, Specialise in products where strengths can be built, Identify niches Cells 6, 8:  In each cell either MA or SBU strangth is low, and the otrher one is medium  Manage for cash, Do not invest unless it is necessary, Move to more profitable segments, Identify niches, Cell 9:  No strength within SBU & very unattractive market  Quit with reasonable procedure
  • 42. GE/McKinsey matrixexample
  • 43. Market attractiveness Factors Weight Rating Value in % 1 - 10Market size 15 5 0,75Market growth 20 6 1,2Sector profitability 10 8 0,8Profit margins 10 8 0,8Industry fluctuaction 5 4 0,2Variability of demand 10 9 0,9Global opportunity 10 9 0,9Availability of Mark. intelligence 5 6 0,3Distribution structure 10 9 0,9Regulatory policy 5 7 0,35TOTAL 100 7,1
  • 44. SBU Strength Factors Weight Rating Value in % 1-9Market share 15 2 0,3Growth in market share 10 6 0,6Product uniqeness 20 8 1,6Customer loyality 5 1 0,05Marketing skills 10 7 0,7Managerial skills 10 9 0,9Product quality 15 9 1,35Production flexibility 5 7 0,35Research&Development skills 5 4 0,2Labour costs 5 8 0,4TOTAL 100 6,45
  • 45. GE / McKinsey SBU internal strengthMatrix – case study High Medium Low 9,00M AA T HighR R 6,00K AE CT T Medium I V 3,00 I T Low Y 0,00 9,00 6,00 3,00 0,00
  • 46. Differentiation strategyin One Star Hotel – valuecurveTypical 1*H setlement Customer expectation Differetiation strategy:
  • 47. Účasť na tvorbestratégie  Legálnosť účasti na tvorbe stratégie  Legitímnosť účasti na tvorbe stratégie  Berie sa do úvahy vplyv:  Neformálnych organizačných štruktúr  Individuálnych záujmov
  • 48. Legálnosť účasti natvorbe stratégie Miera legálnej účasti na tvorbe stratégie, prípadne voľnosti v procese tvorby stratégií je daná mierou inštitucionalizovanej autonómnosti ale hlavne zodpovednosti v rozhodovaní.  Úplná účasť:  SZČO  Konateľ obchodnej spoločnosti ak je zároveň aj jediný vlastník  Viazaná a obmedzená účasť:  Konateľ obchodnej spoločnosti  Štatutárny orgán verejnoprávnej organizácie  Predstavenstvo obchodnej spoločnosti a družstva  Splnomocnenec v rozsahu splnomocnenia  Žiadna účasť:  Líniový a funkčný manažér  Radový zamestnanec
  • 49. Legitímnosť účasti na tvorbestratégie  Nie je determinovaná legálnosťou, t.j. subjekt, ktorý sa chce podieľať na tvorbe stratégie  nenesie za jej tvorbu žiadnu zodpovednosť,  nemá za úlohu participovať na tvorbe stratégie  Je determinovaná  kompetenciami subjektu (odbornosťou a schopnosťami)  súladom  pohnútok, osobných zámerov subjektu  dôsledkov ním navrhovanej, resp. realizovanej stratégie s cieľmi organizácie