Principal of management book ch 9

1. Principles of Management
Strategic management
Presented by
Laiba Nadeem (04)
Wajeeha Zahid (10)
Minahil khalid (68)
Talha Nasir (82)
Junaid Bukhari (70)

2. Chapter Outline
What is strategic management
why is strategic management
important?
Corporate strategies
Competitive strategies
Current Strategic
management issues
The Strategic management
process
6
5
4
1
2
3

3. Strategy
 Strategy is the central ,integrated and externally oriented concept
how an organization will achieve its goals/objectives.
 Way of doing a thing or plan
 A plan or action designed to achieve a long term or overall aim.

4. Strategic management
What managers do to develop the organization’s strategies.
 It it includes all the four management functions _planning, organizing, leading and
controlling.
Is the body of knowledge that answers questions about the development and implementation
of good strategies.
Organization's Strategies
The decisions and actions that determine the long-run performance of an organization.

5. Strategic management
Business Model
How a company is going to make money
Earn profit
By work processes and work activities.
Example :-
Dell Computers
Focuses on two things:
Whether customers will value what the company is providing.
Whether the company can make any money doing that.

6. Why is strategic management is
important?
It results in higher organizational performance.
It requires that managers examine and adapt to business environment
changes.
Organizational culture is complex and diverse. So everyone needs to work
together to achieve organizational goals and to satisfy customer needs
It gives direction to managers

7. The Strategic
Management Process
Six-Step process that organizations follow to plan, implement, and
evaluate their strategies.

8. 1. Identifying the Organization's Current
Mission, Goals, and Strategies
Mission statement
Organization's core values, target audience, and aspirations
Facebook's mission statement example
Alignment towards a common goal
Well-defined mission statement also helps stakeholders, such as customers
and investors, understand the organization's purpose and values.

9. 2. Doing an External Analysis
External analysis involves understanding the trends and changes in the business
environment.
The requirement for restaurant chains
External analysis components
Proactive approach
Pinpointing opportunities

10. 3. Doing an Internal Analysis
Provides important information about an organization’s specific resources and
capabilities
Resources are its assets—financial, physical, human, and intangible
Capabilities are its skills and abilities in doing the work activities needed in its
business—“how” it does its work
Core competencies
Strengths and Weaknesses
SWOT analysis
Google's internal analysis

11. 4. Formulating Strategies
Strategies involves leveraging strengths, addressing weaknesses, capitalizing on
opportunities, and mitigating threats
Corporate strategies
Competitive strategies
Functional strategies
Coca-Cola's corporate strategy

12. 5. Implementing Strategies
Strategies is crucial for translating plans into action
Implementation requires clear communication, resource allocation, and
monitoring progress.
Implementation involves engaging employees, aligning processes, and adapting
to changing circumstances.
Tesla's competitive strategy

13. 6. Evaluating Results
By gathering feedback
organizations can make informed decisions and adjust their strategies accordingly
Amazon's evaluation
By continuously monitoring and evaluating results, Amazon identifies areas for
improvement, adapts its operations, maintaining its position as a market leader in
e-commerce.

14. Six-Step process that organizations follow to plan, implement, and
evaluate their strategies

15. Corporate Strategies
A corporate strategy is the one who determines what business a
company in or wants to be in and also what it wants to do with
the business .
Strategies
There are two strategies :
 What a company desires.
 What the top managers decided to do with the businesses .
Either they want to grow them ,keep the same or renew them.
Example
Pepsico cooperate with other businesses that are :
 Pepsico American Beverages
 Pepsico American foods

16. Organization
GROWTH
An organization
expands no of markets
either by current or
new businesses
Concentration
.
Vertical
Integration
Horizontal
Integration
Diversification
STABILITY
Organization continue
to serve and to do what
it is currently doing .
Renewal
Managers need to
develop strategies that
addresses declining
performance when
organization is in
trouble .
Retrenchment
Turn around
strategies
Corporate
strategy

17. Growth
When an organization expands and grows it
 Have increased revenues
 Increased no of employees
 Increase market share
Now organization can grow by
Concentration
A company focuses on a single product or market .By doing this company concentrates on particular area to
lead effectiveness and efficiency .
Example
A company fully concentrates on the production of shoes .
Vertical integration
 Backward (organization becomes its own supplier)
 Forward (organization becomes its own distributor e.g Apple have 287 stores for distribution )
 Both backward or forward
Horizontal integration
Company grows by combining with competitors for increased revenue and profit .
Example
In Pak ENGRO FOODS is a company that produces dairy products acquired witrh business of WALLS that
produces ice cream .
DIVERSIFICATION
It has two types :
 Related (strategic fit eg Nestle enter health care and nutrition maker )
 Unrelated ( no strategic fit eg FAUJI fertilizers diversified into financial services of Askari Bank)

18. STABILITY
It is the organization have
 Same clients
 Same products
 No change and continue to serve same
RENEWAL
In this managers need to develop for new strategies
Types :
Retrenchment
• Short run
• For minor performance problems
• Either it cut costs or restructure organization
• Turn around strategies
• Long run
• For major and severe problems

19. HOW CORPORATE STRATEGIES ARE MANAGED
Mangers can manage the collection or portfolio of businesses using
a tool called CORPORATE PORTFOLIO MATRIX .
• First introduced as BCG matrix (Boston Consulting Group )
• It is 2*2 matrix means 2 rows and 2 coloumns .
• Horizontal axis represents market share that is cash generation
• Vertical axis shows market growth that is cash usage .
Stars ?
Cow Dog
Market
growth
rate
Market share

20. Competition
Competition refers to the rivalry between individuals, companies, or entities
striving to achieve a common goal such as gaining market share, customers or
resources.
Example:
• Apple vs Android
• Pepsi vs Coca-Cola
Types:
1. Direct similar products or services, targeting the same customer base.
Example: KFC & Burger King
2. Indirect different products or services but fulfill a similar need.
Example: Coffee Shops and Convenience Stores

21. Competitive Strategy:
 Tells us how an organization compete in its businesses.
Small organizations:
• 1 line business
• How to compete in its primary or main market.
Large organizations:
• Multiple businesses
• Defines competitive advantage
SBU’s
“ Each Independent business in organizations of multiple business lines formulate their own competitive strategy
are referred to as strategic business units.”

22. Competitive Advantage:
Organization’s distinctive competitive edge
Competitive edge comes from:
By doing something others can’t do
By doing it better than others
Company resources
Example:
Fast food Restaurants

23. Role of Competitive Advantage:
1.Quality as competitive advantage:
 superior characteristics, reliability, and excellence of a product or service that sets it apart from competitors
Example:
Smartphone companies
2.Design thinking as competitive advantage:
 Problem solving approach to address complex problems with creative solutions.
 human-centered approach to solve problems through innovation, resulting in superior products, services, or
experiences.
Example:
Food delivery service

24. 3. Social media as competitive advantage:
 Powerful marketing and communication tool to engage with their target audience, build brand loyalty,
and gain a competitive edge.
Example:
Clothing Retailer
Sustaining competitive advantage:
 Maintaining and prolonging the superior position of a company or individual in
the market over time.
 Involves continuously innovating, adapting to market changes, and consistently
delivering unique products to customers that competitors find difficult to
replicate.

25. How to achieve Competitive Advantage?

26. Purpose of Porter’s Five Forces Model
To check competition of a business
To get knowledge about strength of its
position

27. Porter’s five forces Model
1.Threat of New Entrants:
 New competitors enter the market when they face no barriers of:
 Cost of entry
 Govt regulations
 Patent or know how
2. Threat of Substitutes:
 Substitute is a product which can replace our product
 If market has close substitute of our product then threat high otherwise low.
Example Coffee is substitute of tea
3.Competitive rivalry:
• How many current competitors of our product or service in the market?
• Who are they?
• Competition is high or low?

28. 4.Bargaining Power of Suppliers:
Bargaining power of supplier is high if:
• Suppliers are limited
• Resources are scarce
• Supplier switching cost is high
5.Bargaining power of buyers:
Bargaining power of buyer is high if:
• Large no of buyers
• Low product switching cost
• Undifferentiated product

30. Choosing a competitive Strategy
 After assessing five forces model and SWOT & PESTEL analysis ,managers choose appropriate competitive
strategy i.e its one that fits competitive strengths of an organization or industry.
Types of Competitive strategies
1.Cost leadership strategy:
 Organization competes on basis of low costs(cost or expenses ,not prices)in its industry.
 Low overhead cost allow to sell products at low prices and company is profitable
2.Differentiation strategy:
 Offers unique products that are widely valued by customers
 Product differences might come from exceptionally high quality, extraordinary service, innovative design,
technological capability, or an unusually positive brand image.

31. 3.Focus strategy:
 Involves a cost advantage (cost focus) or a differentiation advantage (differentiation
focus) in a narrow segment.
 Focus strategy is feasible depends on the size or the segment and whether the
organization can make money serving that segment.
Stuck in the middle
• Costs are too high to compete with the low-cost leader or when its products and services
aren’t differentiated enough to compete with the differentiator.
• Choose a competitive advantage of either cost or differentiation to unstuck.
• It can be done by aligning resource, capabilities, and core competencies.

32. Current Strategic
Management Issues:
• With the change in Technology, managers job is becoming so tough as they
are suppose to make new strategies for business.
• Which business is to start, How to pursue that business, Short term
planning, Long term goals etc.

33. • The Need for Strategic Leadership:
Strategic Leadership: is the ability to anticipate, envision, maintain
flexibility, think strategically, and work with others in the organization
to initiate changes that will create a viable and valuable future for
the organization.
There are eight key dimensions that how top managers provide
effective strategic leadership.

35. • The Need for Strategic Flexibility:
Strategic Flexibility is the ability to recognize that the chosen strategy is not
working and to recognize the changes occurred in external environment.
Given below are some suggestions for developing strategic flexibility:
 Know what's happening with strategies currently being used by monitoring
and measuring results.
 Encourage employees to be open about disclosing and sharing negative
information.
 Get new ideas and perspectives from outside the organization.
 Have multiple alternatives when making strategic decisions.
 Learn from mistakes.

36. • Important Organizational Strategies for
Today's Environment:
e-Business Strategies: Managers use e-Business strategies to take some
competitive edge over their rivals.
• Online order taking
• Web based inventory to reduce the storage cost
• Online biddings to reduce the sales force costs, etc.
For Example: HBL mobile app the most among others, it allows me to fast
money transfers, bill payments, other bank credit card payments, easy
access, ease of use, user friendly, Etc.

37. Customer Service Strategies: "Giving customers what they want" it is
often the major aspect of organizations marketing strategy and also getting
customer feedback.
For Example: Some Telecom companies enabling customers to make their
own bundles for calls and internet.
Innovation Strategies: Two types of strategic decisions reflect the
innovation philosophy of organizations and its managers. i.e., Innovation
emphasis and innovation timings.
It is required to know whether the organization is going to focus:
• Scientific research
• Product development
• Process development

38. Innovation Timing: It depends upon top management's decision, whether
company will innovate:-
 A Product
 The First Mover Advantage
 The new innovation made by competitor
First Mover: An organization that’s first to bring a product innovation to the
market or to use a new process innovation.

39. Advantages
 Reputation for being
innovative and industry leader
 Cost and learning benefits
 Opportunity to begin building
customer relationships and
customer loyalty
Disadvantages
 Risk of competitors imitating
innovations
 Financial and strategic risks
 High development costs

40. Conclusion
 Strategic planning serves as a compass for organizations, guiding
them towards their desired future.
 It emphasizes the importance of setting clear goals, making informed
decisions, adapt to changing environments and allocating resources
effectively to gain a competitive edge.
 Strategic planning helps organizations to proactively shape their
destiny and plays a key role in the success and sustainability of
organizations