More Related Content Similar to David sm13 ppt_01
Similar to David sm13 ppt_01 (20) More from Esen Sandıraz (20) David sm13 ppt_011. Copyright © 2011 Pearson Education, Inc.
Publishing as Prentice Hall
Ch 1 -1
Book:
Strategic Management:
Concepts & Cases
14th
Edition
Fred David
Lecturer:
Murat KOÇ
Asst.Prof
Interview: Friday 15.00
e-mail: muratkoc@cag.edu.tr
Course:
Strategic Management/
Business Policy
Assesment Methods:
%40 Mid Term
%10 Quizes+Term Paper
%50 Final Exam
2. Copyright © 2011 Pearson Education, Inc.
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Ch 1 -2
Introduction
Welcome to strategic management course.
This is a challenging and exciting capstone
course that will allow you to function as the
owner or chief executive officer of different
organizations.
In this course, you can look forward to
making strategic decisions both as an
individual and as a member of a team.
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Ch 1 -3
Introduction
No matter how hard employees work, an
organization is in real trouble if strategic
decisions are not made effectively.
You will have the opportunity in this course to
make actual strategic decisions, perhaps for
the first time in your academic career.
You will also need to integrate knowledge
acquired in previous business courses.
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Ch 1 -4
Chapter 1
The Nature of Strategic Management
STRATEGY (Etymology of word): "art of a general," from strategos
"general, commander of an army," from stratos "multitude, army,
expedition, encamped army + agos "leader.
We will discuss the relevance of Sun Tzu’s The Art of War to
strategic management.
-Masters of Fighting
don’t get angry.
-Masters of
Winning don’t fear.
-Smarts win without
fighting.
-Ignorant fight to
win.(544-496 BC)
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Ch 1 -5
SUN TZU
Sun Tzu (also rendered as Sun Zi)
(544-496 BC) was a Chinese
military general, strategist and
philosopher who lived in the
Spring and Autumn Period of
ancient China. The name he is
best known by is actually an
honorific which means "Master
Sun": His birth name was Sun Wu
and he was known outside of his
family by his courtesy name
Changqing. He is traditionally
credited as the author of The Art
of War, an extremely influential
ancient Chinese book on military
strategy. Sun Tzu has had a
significant impact on Chinese and
Asian history and culture, both as
the author of The Art of War and
as a legendary historical figure.
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Ch 1 -6
Chapter 1
The Nature of Strategic Management
Excerpts from THE ART OF WAR:
(Note: Substitute the words strategy or strategic planning for war or
warfare)
War is a matter of vital importance to the state: a matter
of life or death, the road either to survival or ruin. Hence, it
is imperative that it be studied thoroughly.
Warfare is based on deception. When near the enemy,
make it seem that you are far away; when far away, make
it seem that you are near.
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Ch 1 -7
Chapter 1
The Nature of Strategic Management
Hold out baits to lure the enemy.
Strike the enemy when he is in disorder.
Avoid the enemy when he is stronger.
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Ch 1 -8
Chapter 1
The Nature of Strategic Management
If your opponent is of choleric temper, try to irritate him.
If he is arrogant, try to encourage his egotism.
If enemy troops are well prepared after reorganization, try to wear
them down.
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Ch 1 -9
Chapter 1
The Nature of Strategic Management
If they are united, try to sow dissension among them.
Attack the enemy
Where he is unprepared, and appear where you are not expected.
These are the keys to victory for a strategist. It is not possible to
formulate them in detail beforehand.
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Ch 1 -10
Chapter 1 The Nature of Strategic Management
A speedy victory is the main object in war.
If this is long in coming, weapons are blunted and morale
depressed.When the army engages in protracted campaigns, the
resources of the state will fall short.
To capture the enemy’s entire army is better than to destroy it; to
take intact a regiment, a company, or a squad is better than to
destroy it.
For to win one hundred victories in one hundred battles is not the
acme of skill. To subdue the enemy without fighting is the supreme
excellence.
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Ch 1 -11
Chapter 1 The Nature of Strategic Management
The art of using troops is this:
- When ten to the enemy’s one, surround him.
- When five times his strength, attack him.
- If double his strength, divide him.
- If equally matched, you may engage him with some good plan.
- If weaker, be capable of withdrawing.
- And if in all respects unequal, be capable of eluding him.
! Know your enemy and know yourself, and in a hundred
battles you will never be defeated.
! When you are ignorant of the enemy but know yourself, your
chances of winning or losing are equal.
! If ignorant both of your enemy and of yourself, you are sure
to be defeated in every battle.
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Ch 1 -12
Chapter 1 The Nature of Strategic Management
He who occupies the field of battle first and awaits his enemy is at
ease, and he who comes later to the scene and rushes into the
fight is weary.
When the enemy is at ease, be able to tire him.
When well fed, be able to starve him; when at rest, be able to
make him move.
Analyze the enemy’s plans so that you will know his shortcomings
as well as his strong points.
Agitate him to ascertain the pattern of his movement.
Lure him out to reveal his dispositions and to ascertain his
position.
Launch a probing attack to learn where his strength is abundant
and where deficient.
And as water has no constant form, there are in warfare no
constant conditions.
Thus, one able to win the victory by modifying his tactics in
accordance with the enemy situation.
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Ch 1 -13
Chapter 1 The Nature of Strategic Management
Brilliant strategists rarely go to battle or to court; they generally
achieve their objectives through tactical positioning well in advance
of any confrontation.
When you do decide to challenge another company (or army),
much calculating, estimating, analyzing, and positioning bring
triumph.
Little computation brings defeat.
If you wait long enough near the river, corpses of enemies come
by
swim.
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Ch 1 -14
Once there were two company
presidents who competed in the same
industry.
These two presidents decided to go on a
camping trip to discuss a possible
merger.
They hiked deep into the woods.
Suddenly, they came upon a grizzly
bear that rose up on its hind legs and
snarled.
Instantly, the first president took off his
knapsack and got out a pair of jogging
shoes.
The second president said, “Hey, you
can’t outrun that bear.” The first
president responded, “Maybe I can’t
outrun that bear, but I surely can
outrun you!“
Strategic Management –A Story
This story captures the notion of
strategic management, which is to
achieve and maintain competitive
advantage
“Hey, you can’t
outrun that bear.”
“Maybe I can’t outrun
that bear, but I surely
can outrun you!”
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Ch 1 -15
SM: Art & science of formulating,
implementing, and evaluating,
cross-functional decisions that enable an
organization to achieve its objectives.
Strategic Management (SM) –Defined
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Ch 1 -16
Purpose of Strategic Management
As this definition implies,
Strategic Management focuses on;
INTEGRATING MANAGEMENT,
MARKETING,
FINANCE/ACCOUNTING,
PRODUCTION/OPERATIONS,
RESEARCH AND DEVELOPMENT,
INFORMATION SYSTEMS,
to Achieve Organizational Success.
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Ch 1 -17
Purpose of Strategic Management
The purpose of strategic management is to
exploit and create new and different
opportunities for tomorrow;
long-range planning,
in contrast, tries to optimize for
tomorrow
the trends of today.
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Ch 1 -18
Strategic Management
In essence, the strategic plan is a
company’s game plan
Just as a football team
needs a good game
plan to have a chance
for success, a company
must have a good
strategic plan to
compete successfully.
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Ch 1 -19
Strategic Management
Profit margins among firms in most industries
have been so reduced by the global
economic recession that there is little room
for error in the overall strategic plan.
A strategic plan results from tough managerial
choices among numerous good alternatives, and it
signals commitment to
specific markets,
policies,
procedures,
and operations in lieu of other, “less desirable”
courses of action.
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Ch 1 -20
The Strategic Management Process
consists of three stages:
Strategy formulation
Strategy implementation
Strategy evaluation
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Ch 1 -21
Vision & Mission
Strategy Formulation
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection
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Ch 1 -22
Issues in Strategy
Formulation
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover
Businesses to enter
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint
ventures
Avoidance of hostile
takeover
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Ch 1 -23
The Strategic Management Process
consists of three stages:
Strategy formulation
No organization has unlimited resources.
Strategists must decide which alternative
strategies will benefit the firm most.
Strategy-formulation decisions commit an
Organization to specific products,
markets, resources, and
technologies over an extended period of
time.
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Ch 1 -24
The Strategic Management Process
consists of three stages:
Strategy-formulation decisions commit an
Organization to specific
products,
markets,
resources,
technologies
over an extended period of time.
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Ch 1 -25
Strategy Implementation
(so that formulated strategies can be
Executed)
Annual Objectives
Devise Policies
Employee Motivation
Resource Allocation
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Ch 1 -26
Strategy Implementation Steps
Developing a strategy-supportive culture
Creating an effective organizational structure
Redirecting marketing efforts
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Ch 1 -27
Strategy Implementation Steps
Preparing budgets
Developing and utilizing
information systems
Linking employee compensation
to organizational performance
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Ch 1 -28
Issues in Strategy
Implementation
Action Stage of Strategic
Management
Mobilization of
employees & managers
Most difficult stage
Interpersonal skills
critical
Action Stage of Strategic
Management
Mobilization of
employees & managers
Most difficult stage
Interpersonal skills
critical
Requires;
Personal Discipline,
Commitment,
Sacrifice
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Ch 1 -29
Strategy Implementation
Successful
strategy implementation
hinges upon managers’
ability to motivate
employees,
which is more
an art than a science.
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Ch 1 -30
Strategy Implementation
Every division
and
department
must decide
on answers
to questions,
such as;
“What must we
do to implement our
part of
the organization’s
strategy?”
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Ch 1 -31
Strategy Implementation
“How best can we
get the job
done?”
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Ch 1 -32
The challenge of implementation is to
stimulate managers and employees
Throughout an organization to work with
pride and enthusiasm
toward achieving stated objectives.
+ =
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Ch 1 -33
Strategy Evaluation
(Managers desperately need
to know when particular strategies are not working well; strategy evaluation is the primary
means for obtaining this information.)
Internal Review
External Review
Performance Measurement
Taking Corrective Action
Selling in
cash
Selling
on credit
All strategies are subject to future modification because
external and internal factors are constantly changing.
are based
on the
current
strategies
Strategy evaluation is needed
because success today is no guarantee of success tomorrow!
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Ch 1 -34
Don’t Forget!
Success always creates newand
different problems;
complacent organizations
experience demise!...
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Ch 1 -35
Peter Drucker: Think through the overall
mission of a business. Ask the key
question:
“What is our business?”
Prime Task of
Strategic Management
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Ch 1 -36
The strategic management
process attempts to
organize quantitative and
qualitative information
under conditions of
uncertainty.
Integrating Intuition & Analysis
The strategic management process can be described as an objective,
logical, systematic
approach for
making major decisions
in an organization.
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Ch 1 -37
Intuition is based on:
Past experiences
Judgment
Feelings
Integrating Intuition & Analysis
Good Strategic Decisions.
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Ch 1 -38
Integrating Intuition & Analysis
Intuition is useful for decision making in
conditions of:
Great uncertainty
Little precedent
Highly interrelated variables
Several plausible alternatives
It is also helpful
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Ch 1 -39
Integrating Intuition & Analysis
Albert Einstein acknowledged the importance of intuition when he said;
“I believe in intuition and inspiration. Imagination is
more important than knowledge, because
knowledge is limited, whereas imagination
embraces the entire world.”
Although some organizations today may
survive and prosper because they have
intuitive geniuses managing them, most
are not so fortunate.
In a sense;
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Ch 1 -40
Involve management at all levels
Intuition & Judgment
Influence all analyses
Integrating Intuition & Analysis
Managers at all levels in an
organization inject their intuition and
judgment into strategic-management
analyses.
Above
All !!!!
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Ch 1 -41
Organizations should continually monitor internal
and external events and trends so that timely
changes can be made as needed. The accelerating
rate of change today is producing a business world
in which customary managerial habits in
organizations are increasingly inadequate.
managerial habits in organizations are increasingly
inadequate.
Adapting to Change
“adept at dapting”
the only constant is
change.
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Ch 1 -42
The need to adapt to change leads organizations
to key strategic-management questions, such as;
“What kind of business should we become?”
“Are we in the right field(s)?”
“Should we reshape our business?”
“What new competitors are entering our industry?”
“What strategies should we pursue?”
“How are our customers changing?”
“Are new technologies being developed that could put us out of business?”
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Ch 1 -43
Key Terms in Strategic Management
Competitive advantage
Strategists
Vision and mission statements
External opportunities and threats
Internal strengths and weaknesses
Long-term objectives
Strategies
Annual objectives
Policies
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Ch 1 -44
Anything that a firm does especially
well compared to rival firms
Strategic Management is
Gaining and Maintaining
Competitive Advantage
When a firm can do something that rival
firms cannot do, or owns something that
rival firms desire, that can represent a
competitive advantage.
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Ch 1 -45
Achieving Sustained Competitive
Advantage
1. For example, newspaper circulation in the United States is steadily declining. Most
national newspapers are rapidly losing market share to the Internet, and other media
that consumers use to stay informed.(problem)
2. Daily newspaper circulation in the United States totals about 55 million copies
annually, which is about the same as it was in 1954. Strategists ponder whether the
newspaper circulation slide can be halted in the digital age.(is a must)
3. The six broadcast networks—ABC, CBS, Fox, NBC, UPN, and WB—are being
assaulted by cable channels, video games, broadband, wireless technologies,
satellite radio, high-definition TV, and digital video recorders.(Fact)
4. The three original broadcast networks captured about 90 percent of the prime-time
audience in 1978, but today their combined market share is less than 50 percent.
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Ch 1 -46
1. Continually adapting to changes in
external trends and events and internal
capabilities, competencies, and resources
Achieving Sustained Competitive
Advantage
2. Effectively formulating, implementing,
and evaluating strategies that capitalize on
those factors
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Ch 1 -47
Strategists
Gather Information
Analyze Information
Organize Information
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Ch 1 -48
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?
Vision and Mission Statements
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Ch 1 -49
External Opportunities and Threats
Analysis of Trends
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
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Ch 1 -50
Basic Tenet of Strategic Management
External Opportunities and Threats
Strategy Formulation
Take advantage of
External Opportunities
Take advantage of
External Opportunities
Avoid/minimize impact of
External Threats
Avoid/minimize impact of
External Threats
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Ch 1 -51
Controllable activities performed
especially well or poorly
Determined relative to competitors
Internal Strengths and Weaknesses
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Ch 1 -52
Typically located in functional areas of the firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Management Information Systems
Internal Strengths and Weaknesses
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Ch 1 -53
Assessing the Internal Environment
Internal Strengths and Weaknesses
Internal Factors
Performance Measures
Ratios
Industry Averages
Survey Data
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Ch 1 -54
Specific results that an organization
seeks to achieve in pursuing its basic
mission
Long-term means more than one year
Long-Term Objectives
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Ch 1 -55
Long-Term Objectives
Essential for ensuring the firm’s success
Provide direction
Aid in evaluation
Create synergy
Reveal priorities
Focus coordination
Provide basis for planning, organizing,
motivating, and controlling
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Ch 1 -56
Means by which long-term objectives
are achieved
Strategies
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Ch 1 -57
Strategies
Examples
Geographic expansion
Diversification
Acquisition
Product development
Market penetration
Retrenchment
Divestiture
Liquidation
Joint venture
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Ch 1 -58
Sample Strategies
Table 1-1
Best Buy
Levi Strauss
New York Times Company
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Ch 1 -59
Short-term milestones that firms must
achieve to reach long-term objectives
Annual Objectives
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Ch 1 -60
Means by which annual objectives will
be achieved
Policies
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Ch 1 -61
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Ch 1 -62
Strategic Management Process
Dynamic & continuous
More formal in larger
organizations
Strategic Management Model
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Ch 1 -63
Strategic Management
Communication is a key to
successful strategic management
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Ch 1 -64
Benefits of Strategic Management
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Ch 1 -65
Benefits of Strategic Management
Nonfinancial Benefits
Enhanced awareness of threats
Improved understanding of competitors’ strategies
Increased employee productivity
Reduced resistance to change
Clearer understanding of performance-reward
relationship
Enhanced problem-prevention capabilities
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Ch 1 -66
Why Some Firms Do No Strategic
Planning
Lack of knowledge of strategic planning
Poor reward structures
Fire fighting
Waste of time
Too expensive
Laziness
Content with success
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Ch 1 -67
Why Some Firms Do No Strategic
Planning (continued)
Fear of failure
Overconfidence
Prior bad experience
Self-interest
Fear of the unknown
Honest difference of opinion
Suspicion
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Ch 1 -68
Pitfalls in Strategic Planning
Strategic planning is an involved, intricate,
and complex process that takes an
organization into uncharted territory
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Ch 1 -69
Effective Strategic Planning is:
A people process more than a paper process
A learning process
Words supported by numbers
Simple and nonroutine
Varying assignments, team membership,
meeting formats, and planning calendars
Challenging assumptions underlying
corporate strategy
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Ch 1 -70
Effective Strategic Planning
continued
Welcomes bad news
Requires open-mindedness and a spirit of
inquiry
Is not a bureaucratic mechanism
Is not ritualistic or stilted
Is not too formal, predictable, or rigid
Does not contain jargon or arcane language
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Ch 1 -71
Effective Strategic Planning
continued
Is not a formal system for control
Does not disregard qualitative information
Is not controlled by “technicians”
Does not pursue too many strategies at once
Continually strengthens the “good ethics is
good business” policy
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Ch 1 -72
Comparing Business and Military
Strategy
Strategic planning started in the military
Similarity
Both business and military organizations must
adapt to change and constantly improve
Difference
Business strategy assumes competition
Military strategy assumes conflict
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Ch 1 -73
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