Management Second Arab World Edition Robbins, Coulter.docx

Management: Second Arab World Edition
Robbins, Coulter, Sidani, Jamali
Chapter 8: Strategic Management
Lecturer: Alaa Hamade
What is Strategic Management?
8-* Copyright © 2015 Pearson Education
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Exhibit 8–1 The Strategic Management Process
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Step 1: Identifying the Current Mission, Goals, and
StrategiesMission: a statement of the purpose of an
organizationThe scope of its products and servicesGoals: the
foundation for further planningMeasurable performance targets
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Exhibit 8–2 Components of a Mission Statement
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Step 2: Doing an external analysisThe environmental scanning
of specific and general environmentsFocuses on identifying
opportunities and threats
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Step 3: Doing an internal analysisAssessing organizational
resources, capabilities, and core competencies:Resources:
Assets that are used to develop and deliver products to
customers.Capabilities: Skills and abilities in doing the work
activities.Core competencies: The major value-creating
capabilities of the organization.Focuses on identifying strengths
and weaknesses
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Step 4: Formulating strategiesDevelop and evaluate strategic
alternatives.Select appropriate strategies for all levels in the
organization that provide relative advantage over competitors (3
types of strategies for the levels)Match organizational strengths
to environmental opportunities.Correct weaknesses.Guard
against threats.
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Step 5: Implementing strategiesEffectively fitting
organizational structure and activities to the environment.
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Step 6: Evaluating resultsHow effective have strategies
been?What adjustments, if any, are necessary?
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Exhibit 8–4 Levels of Organizational Strategies
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What is a Corporate Strategy?
A corporate strategy is one that specifies what businesses a
company is in or wants to be in and what it wants to do with
those businesses.
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What Are the Types of Corporate Strategies?
1. Growth:
expansion into new products and markets
2. Stability:
maintenance of the status quo
3. Renewal:
examination of organizational weaknesses that are leading to
performance declines
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1. Growth Strategy
Seeking to increase the organization’s business by expansion
into new products and markets.

Types of Growth Strategies
Concentration
Vertical integration
Horizontal integration
Diversification
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Concentration
Focusing on a primary line of business and increasing the
number of products offered or markets served.
Vertical Integration
Backward vertical integration: attempting to gain control of
inputs (become a self-supplier).
Forward vertical integration: attempting to gain control of
output through control of the distribution channel or provide
customer service activities (eliminating intermediaries).
1. Growth Strategy (cont’d)
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Horizontal Integration
Combining operations with another competitor in the same

industry to increase competitive strengths and lower
competition among industry rivals.
Related Diversification
Expanding by combining with firms in different, but related
industries that are “strategic fits”.
Unrelated Diversification
Growing by combining with firms in unrelated industries where
higher financial returns are possible.
1. Growth Strategy (cont’d)
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2. Stability Strategy
This strategy is appropriate if:
Managers want to maintain the status quo to deal with the
uncertainty of a dynamic environment.
The industry is experiencing slow- or no-growth conditions.
If the owners of the firm elect not to grow for personal reasons.
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3. Renewal StrategiesDeveloping strategies to counter
organization weaknesses that are leading to performance

declines.Retrenchment: focusing of eliminating non-critical
weaknesses and restoring strengths to overcome current
performance problems. Related to a non-core business process
or function.Turnaround: addressing critical long-term
performance problems through the use of strong cost
elimination measures and large-scale organizational
restructuring solutions. Related to a core business process or
function.
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How are Corporate Strategies Formulated?
Managers manage a portfolio (or collection) of businesses using
a corporate portfolio matrix such as the BCG Matrix.
BCG Matrix Developed by the Boston Consulting
Group.Considers market share and industry growth
rate.Classifies firms as:Cash cows: low growth rate, high
market shareStars: high growth rate, high market
shareQuestion marks: high growth rate, low market
shareDogs: low growth rate, low market share
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Exhibit 8–5 BCG Matrix

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How are Corporate Strategies Formulated?
(cont’d) Possible strategies:Cash cows: They are milked for as
much as they can, limit any new investment, and use the cash to
invest in stars and questions marks that have strong potential
for higher market share.Stars: Ese cash from cash cows to invest
heavily in stars and take advantage of market growth and
maintain market share. Could develop into cash cow as growth
slows.Question marks: The hardest decisions are for question
marks. Some will be sold off and others invested heavily to turn
into stars – depending on potential for growth in market
share.Dogs: They should be sold off or liquidated
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Competitive Strategies
A competitive strategy is focused on how an organization will
compete in its business(es).
For an organization in only one line of business, the competitive
strategy describes how it will compete in its primary or main
market.

When an organization is in several different businesses, those
single businesses that are independent and formulate their own
competitive strategies are often called strategic business units
(SBUs).
Each SBU has its own competitive strategy that defines its
competitive advantage, the products or services it will offer, the
customers it wants to reach, and the like.
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The Role of Competitive Advantage
1. Competitive Advantage sets an organization’s distinctive
competitive edge.
2. That distinctive edge comes from the organization’s core
competencies because the organization does something that
others cannot do or does it better than others can do it.
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Quality as a Competitive AdvantageDifferentiates the firm from
its competitors.Can create a sustainable competitive
advantage.Represents the company’s focus on quality
management to achieve continuous improvement and meet
customers’ demand for quality.

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Sustaining Competitive AdvantageContinuing over time to
effectively exploit resources and develop core competencies
that enable an organization to keep its edge over its industry
competitors.It is not easy to create a sustainable competitive
advantage due to market instabilities, new technology, and other
changes.By using strategic management, managers can better
position their organizations to get a sustainable competitive
advantage.
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How are Competitive Strategies Formulated?
Porters Five Forces ModelThreat of New Entrants
The ease or difficulty with which new competitors can enter an
industry.Threat of Substitutes
The extent to which switching costs and brand loyalty affect the
likelihood of customers adopting substitute products and
services. Substitutes are products a completely different product
from a different industry that could replace the organizations
core offering. sway over and influence competitors in an
industry.

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Bargaining Power of Buyers
The degree to which buyers have the market strength to hold
Bargaining Power of Suppliers
The power suppliers have over organizations in determining the
price and quality of the products and services being
supplied.Current Rivalry
Intensity among rivals increases when industry growth rates
slow, demand falls, and product prices descend.
How are Competitive Strategies Formulated? (cont’d)
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Exhibit 8–6 Five Forces Model
Source: Based on M.E. Porter, Competitive Strategy:
Techniques for Analyzing Industries and Competitors (New
York: The Free Press, 1980).
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Choosing a Competitive Strategy
Cost Leadership StrategySeeking to attain the lowest total
overall costs relative to other industry competitors.
Differentiation StrategyAttempting to create a unique and
distinctive product or service for which customers will pay a
premium.
Focus StrategyUsing a cost or differentiation advantage to
exploit a particular market segment rather than a larger market.
Stuck in the MiddleWhen an organization cannot develop a cost
or differentiation advantage.
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Functional Strategy
Functional StrategyUsed by an organization’s various functional
departments to support the competitive strategy
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MGT 201 – Fundamentals of Management

Di Fara Discussion Case
You have been asked to consult by the owners of Di Fara, New
York City’s best pizza! They
have heard of the growth of the restaurant industry in the
Middle East and specifically in
Dubai. The reputation of the expansion of all the burger joints
in Dubai has reached New
York. Di Fara wants to capitalize on that and have a presence in
Dubai.
The owners have called you in to
consult them on what they should
do. You need to provide them with
two recommendations for their
strategy. First, how should they grow
internationally? Second, what
corporate and competitive strategy
should they implement?
Follow these steps:
1. Do some research on the
restaurant – learn more about it.
2. Generate ideas about the alternative recommendations that
the members think will
be most likely to succeed. Be as innovative and creative and no
suggestion should be
criticized
3. List and explain the pros and cons of the alternatives.
4. Select one of the alternatives with an explanation why you
think it is the best.

Management Second Arab World Edition Robbins, Coulter.docx

Management Second Arab World Edition Robbins, Coulter.docx

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