Chapter 9 Strategic Management and


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Chapter 9 Strategic Management and

  1. 1. Chapter 9 Strategic Management and Strategic Competitiveness
  2. 2. Foundations of strategic competitiveness <ul><li>Basic concepts of strategy: </li></ul><ul><ul><li>Competitive advantage —operating in a successful way that is difficult for competitors to imitate. </li></ul></ul><ul><ul><li>Sustainable competitive advantage—consistently dealing with market and environmental forces better than competitors. </li></ul></ul>
  3. 3. Definitions <ul><ul><li>Strategy —a comprehensive action plan providing long-term direction and guiding resource utilization to accomplish organizational goals with sustainable competitive advantage. </li></ul></ul><ul><ul><li>Strategic intent —focusing all organizational energies on a unifying and compelling goal. </li></ul></ul>
  4. 4. Basic concepts of strategy: <ul><ul><li>Strategic management —the process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage. </li></ul></ul>
  5. 5. Strategic management goals <ul><ul><li>Formulate and implement strategies that yield long-term, sustainable competitive advantage. </li></ul></ul><ul><ul><li>Create above-average returns for investors. </li></ul></ul><ul><ul><ul><li>Earning above-average returns depends in part on the organization’s environment. </li></ul></ul></ul>
  6. 6. What is the strategic management process? <ul><li>Strategy formulation </li></ul><ul><ul><li>The process of creating strategy. </li></ul></ul><ul><ul><li>Involves assessing existing strategies, organization, and environment to develop new strategies and strategic plans capable of delivering future competitive advantage. </li></ul></ul>
  7. 7. The strategy formulation process (Drucker) <ul><li>Ask these questions: </li></ul><ul><ul><ul><li>What is our business mission? </li></ul></ul></ul><ul><ul><ul><li>Who are our customers? </li></ul></ul></ul><ul><ul><ul><li>What do our customers consider value? </li></ul></ul></ul><ul><ul><ul><li>What have been our results? </li></ul></ul></ul><ul><ul><ul><li>What is our plan? </li></ul></ul></ul>
  8. 8. Analysis of mission <ul><ul><li>The reason for an organization’s existence. </li></ul></ul><ul><ul><li>Good mission statements identify: </li></ul></ul><ul><ul><ul><li>Customers </li></ul></ul></ul><ul><ul><ul><li>Products and/or services </li></ul></ul></ul><ul><ul><ul><li>Location </li></ul></ul></ul><ul><ul><ul><li>Underlying philosophy </li></ul></ul></ul><ul><ul><li>An important test of the mission is how well it serves the organization’s stakeholders </li></ul></ul>
  9. 9. Here is a sample mission statement from Vanguard <ul><li>To provide a broad range of superior-performing mutual funds and related financial services that meets the needs of individual and institutional investors, with unmatchable excellence and at the lowest reasonable cost , through the efforts, experiences, talents, and dedication of a diverse crew. </li></ul>
  10. 10. Analysis of core values <ul><ul><li>Values are broad beliefs about what is or is not appropriate. </li></ul></ul><ul><ul><li>Organizational culture reflects the dominant value system of the organization as a whole. </li></ul></ul>
  11. 11. Analysis of objectives <ul><li>Typical operating objectives: </li></ul><ul><ul><ul><li>Profitability </li></ul></ul></ul><ul><ul><ul><li>Market share </li></ul></ul></ul><ul><ul><ul><li>Human talent </li></ul></ul></ul><ul><ul><ul><li>Financial health </li></ul></ul></ul><ul><ul><ul><li>Cost efficiency </li></ul></ul></ul><ul><ul><ul><li>Product quality </li></ul></ul></ul><ul><ul><ul><li>Innovation </li></ul></ul></ul><ul><ul><ul><li>Social responsibility </li></ul></ul></ul>
  12. 12. Analysis of organizational resources and capabilities <ul><li>Assessing organizational S trengths and W eaknesses within SWOT analysis </li></ul><ul><li>Identifying core competencies </li></ul><ul><ul><ul><li>Technology </li></ul></ul></ul><ul><ul><ul><li>Human resources </li></ul></ul></ul><ul><ul><ul><li>Manufacturing approaches </li></ul></ul></ul><ul><ul><ul><li>Management talent </li></ul></ul></ul><ul><ul><ul><li>Financial strength </li></ul></ul></ul>
  13. 13. Analysis of industry and environment <ul><li>Assessing O pportunities and T hreats within SWOT analysis </li></ul><ul><li>Michael Porter’s 5 competitive forces </li></ul><ul><ul><li>Competitive rivalry </li></ul></ul><ul><ul><li>Threat of new entrants </li></ul></ul><ul><ul><li>Power of suppliers </li></ul></ul><ul><ul><li>Power of buyers </li></ul></ul><ul><ul><li>Substitute products </li></ul></ul>
  14. 14. Levels of strategy <ul><li>Corporate strategy —d irects the organization toward sustainable competitive advantage. </li></ul><ul><li>Business strategy —s ets direction for a single business unit or product line. </li></ul><ul><li>Functional strategy —g uides the use of resources, focusing on activities within a specific area of operations. </li></ul>
  15. 15. What types of strategies are used by organizations? <ul><li>Growth and diversification strategies </li></ul><ul><ul><li>Growth strategies —s eek an increase in size and the expansion of current operations. </li></ul></ul><ul><ul><li>Concentration strategies —growth occurs through expansion in the same business area. </li></ul></ul><ul><ul><li>Diversification strategies —growth occurs through acquisition of or investment in new and/or different business areas. </li></ul></ul>
  16. 16. Types of strategies <ul><li>Restructuring and divestiture strategies </li></ul><ul><ul><li>Liquidation </li></ul></ul><ul><ul><li>Restructuring </li></ul></ul><ul><ul><li>Divestiture </li></ul></ul><ul><li>Cooperative strategies strategic alliances </li></ul><ul><ul><li>two or more organizations partner to pursue an area of mutual interest. </li></ul></ul><ul><li>E-business strategies </li></ul>
  17. 17. Porter’s model <ul><ul><li>Generic strategies for gaining competitive advantage: </li></ul></ul><ul><ul><ul><li>Differentiation strategy </li></ul></ul></ul><ul><ul><ul><li>Cost leadership strategy </li></ul></ul></ul><ul><ul><ul><li>Focused differentiation strategy </li></ul></ul></ul><ul><ul><ul><li>Focused cost leadership strategy </li></ul></ul></ul>
  18. 18. Product life cycle strategy <ul><ul><li>Introduction and growth stages </li></ul></ul><ul><ul><ul><li>Use differentiation and prospector strategies </li></ul></ul></ul><ul><ul><li>Maturity stage </li></ul></ul><ul><ul><ul><li>Use focus and/or cost leadership strategies </li></ul></ul></ul><ul><ul><li>Decline stage </li></ul></ul><ul><ul><ul><li>Use defender or analyzer strategies </li></ul></ul></ul>
  19. 19. How are strategies formulated? <ul><li>Corporate-level strategy formulation </li></ul><ul><ul><li>Key issue is the selection and refinement of the organization’s mix of businesses. </li></ul></ul><ul><ul><li>Approaches to formulating business-level strategies: </li></ul></ul><ul><ul><ul><li>Portfolio planning </li></ul></ul></ul><ul><ul><ul><li>Adaptive strategies </li></ul></ul></ul>
  20. 20. How are strategies formulated? <ul><li>Types of adaptive strategies: </li></ul><ul><ul><li>Prospector strategy </li></ul></ul><ul><ul><ul><li>Appropriate in dynamic, high-potential environments </li></ul></ul></ul><ul><ul><li>Defender strategy </li></ul></ul><ul><ul><ul><li>Appropriate in stable or declining environments </li></ul></ul></ul><ul><ul><li>Analyzer strategy </li></ul></ul><ul><ul><ul><li>Following leading competitors in high-potential environments </li></ul></ul></ul><ul><ul><li>Reactor strategy </li></ul></ul><ul><ul><ul><li>Following competitors as a last resort regardless of environment </li></ul></ul></ul>
  21. 21. How are strategies formulated? <ul><li>Incrementalism </li></ul><ul><ul><li>Modest and incremental changes in strategy occur as managers learn from experience. </li></ul></ul><ul><li>Emergent strategies </li></ul><ul><ul><li>Develop progressively over time in the streams of decisions that managers make. </li></ul></ul>
  22. 22. What are current issues in strategy implementation? <ul><li>Strategic leadership </li></ul><ul><ul><li>Strategic management is a leadership responsibility. </li></ul></ul><ul><ul><li>The capability to get people to successfully engage in the continuous change, refinement, and implementation of strategies. </li></ul></ul>
  23. 23. What are current issues in strategy implementation? <ul><li>Critical tasks of strategic leadership … </li></ul><ul><ul><li>Be a guardian of trade-offs. </li></ul></ul><ul><ul><li>Create a sense of urgency. </li></ul></ul><ul><ul><li>Ensure that everyone understands the strategy. </li></ul></ul><ul><ul><li>Be a teacher. </li></ul></ul><ul><ul><li>Be a great communicator. </li></ul></ul>
  24. 24. Questions? For next class, please read chapter 10