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UIU Faculty of Economics Strategic Management
- 1. Universitas Islam Indonesia – Faculty of Economics Chapter 1 THE NATURE OF STRATEGIC
- 2. 2 The Strategic Management Process The Nature of Strategic Management Vision/ Mission Objectives External Analysis Internal Analysis Strategic Choice Strategy Implementation Competitive Advantage Mission Identify and exploit differences that may lead to competitive advantage
- 3. 3 The Nature of Strategic Management The Strategic Management Process External Analysis Internal Analysis STRATEGIC CHOICE Business Level Corporate Level Business positioning Which businesses to enter? Copying competitive moves of other successful companies rarely works!
- 4. 4 The Nature of Strategic Management What Is STRATEGIC MANAGEMENT? The set of decisions and actions that result in the formulation and implementation of plans designed to achieved a company’s objective
- 5. 5 The Nature of Strategic Management 3 STRATEGIC QUESTIONS 1. What’s the company’s present situation? 2. Where does the company need to go from here? Business(es) to be in and market positions to stake out Buyer needs and groups to serve Direction to head 3. How should it get there? A company’s answer to “how will we get there?” is its strategy
- 6. 6 The Sources of Superior Profitability The Nature of Strategic Management Corporate and business level managers center their attention on “doing the right things”, whereas managers at the functional level center their attention on “doing things right”
- 7. 7 What Is A COMPETITIVE ADVANTAGE? The firm’s ability to creates more economic values than competitors • Competitive advantage is the result of doing something different and/or better than competitors. • If all firms’ strategies were the same, no firm would have a competitive advantage. The Nature of Strategic Management
- 8. 8 The Nature of Strategic Management Temporary vs. Sustainable Competitive Advantage (SCA) • A firm achieves a CA when it provides buyers with superior value compared to competitors or offers the same value at a lower cost. It typically results in high profits, that attract competition, which limits the duration of CA. • Competitors imitate the advantage or offer something better. Therefore, most CA is temporary. • The firm achieves a SCA if its advantage persists despite the best efforts of competitors to match or surpass its advantage. • Some competitive advantages are sustainable if: • Competitors are unable to imitate the source of advantage. • No one conceives of a better offering. • In time, even sustainable competitive advantage may be lost Developing expertise and resource strengths not easily imitated or matched by rivals
- 9. 9 The Nature of Strategic Management Competitive Disadvantage Parity Advantage Below Normal Normal Above Normal Economic Returns • exceeding expectations • meeting expectations • failing expectations
- 10. 10 The Nature of Strategic Management STRATEGIC APPROACH CHOICES Low-cost provider Differentiation on features Focus on market niche Best-cost provider Building Competitive Advantage by:
- 11. 11 The Nature of Strategic Management Dimensions of Strategic Decisions Require top-management decisions Require large amounts of the firm’s resources Have multi-functional or multi-business consequences. Affect the firm’s long-term prosperity and future oriented
- 12. 12 Conclusion Who can conclude deserve points Raise your hand!!
Editor's Notes
- https://www.youtube.com/watch?v=icqu2Kl1Imc
- Strategy is about discovering and exploiting these differences
- 3 Levels of Strategy Corporate level: board of directors, CEO & administration. Business level: business and corporate managers. Functional level: Product, geographic, and functional area managers. Corporate Managers must translate the statements of direction and intent at the corporate level into concrete objectives and strategies for individual business divisions (SBU). Business-level strategic managers determine how the firm will compete in the selected procuct-market arena.
- Require meeting customer needs either more effectively (with products or services that customers value more highly) or more efficiently (by providing products or services at lower cost). Preference for the firm’s output people are willing to pay a premium (Apple) Cost advantage vis-à-vis competitors lower costs of production/distribution. Example: Lenovo Competitive Advantages vs. Competitive Parity vs. Competitive Disadvantages. Competitive Parity The firm’s offerings are “average” People do not have a preference for the firm’s offering The firm does not have a cost advantage over others. Competitive Disadvantage People may have an aversion to the firm’s offering. The firm may have a cost disadvantage. A firm may have outdated technology/equipment. A firm may have a negative reputation. k
- Striving to become the industry’s low-cost provider (efficiency). Outcompeting rivals on differentiating features (effectiveness). (a “superior product” type of higher quality, better performance, wider selection, value-added services, etc.) Focusing on better serving a niche market’s needs (efficiency and or effectiveness). (winning a competitive edge by doing a better job than rivals of serving the needs and preferences of buyers comprising the niche) Offering the lowest (best) prices for differentiated goods (best-cost provider). Strive to be the industry’s low-cost provider: Wal-Mart, Southwest Airlines Outcompete rivals on a key differentiating feature: Johnson & Johnson – Reliability in baby products Harley-Davidson – King-of-the-road styling Rolex – Top-of-the-line prestige Mercedes-Benz – Engineering design and performance Amazon.com – Wide selection and convenience Focus on a narrow market niche eBay – Online auctions McAfee – Virus protection auctions Starbucks – Premium coffees and coffee drinks Develop expertise, resource strengths, and capabilities not easily imitated by rivals FedEx – Next-day delivery of small packages Walt Disney – Theme park management and family entertainment Toyota – Sophisticated production system Ritz-Carlton – Personalized customer service
- Strategic issues require top-management decisions Strategic decisions overarch several areas of a firm’s operations Usually only top management has the perspective needed to understand their broad implications Usually only top managers have the power to authorize necessary resource allocations Strategic issues require large amounts of the firm’s resources They involve substantial allocations of people, physical assets, and money Strategic decisions commit the firm to actions over an extended period In highly competitive firms, achieving and maintaining customer satisfaction frequently involves commitment from every facet of the firm Strategic issues often affect the firm’s long-term prosperity Strategic decisions commit the firm for a long time, typically 5 years; however the impact lasts much longer. Once a firm has committed itself to a strategy, its image and competitive advantages are usually tied to that strategy. Firms become known for what they do and where they compete. Shifting away from that can jeopardize their previous gains. Strategic issues are future-oriented They are based on what managers forecast, rather than what they know. Emphasis is on the development of solid projections that will enable a firm to seek the most promising strategic options. A firm will succeed only if it takes a proactive (anticipatory) stance toward change Strategic issues usually have multi-functional or multi-business consequences. Strategic decisions have complex implications for most areas of the firm. Decisions about customer mix, competitive emphasis, or organizational structure involve a number of the firm’s SBUs, divisions, or program units K