Managing strategically

Managing
Strategically
Johanna Navas

Learning Outcomes:
1. Explain the role of strategic management.
2. Describe the role of managers in each
strategic management step.
3. Describe organizational strategies.
4. Describe current strategic management
issues.

The Importance of Strategic
Management
What is Strategic Management?
The set of managerial decisions and
actions that determines the long-
run performance of an
organization.

Strategies:
Plans for how an organization will do
what it’s in business to do, how it will
compete successfully, and how it will
attract and satisfy its customers in
order to achieve its goals.
Management

Business model:
A strategic design for how a
company intends to profit from its
strategies, work processes, and
work activities.
Management

Why is Strategic Management
Important?
1. It results in higher organizational
performance.
2. It requires that managers examine
and adapt to business environment
changes.
Management

3. It coordinates diverse
organizational units, helping
them focus on organizational goals.
4. It is involved in the managerial
decision-making process.
Management

The Strategic Management Process
Identify the
organization’s
current mission,
goals, and strategies
Internal
Analysis
Strengths
Weaknesses
External Analysis
Opportunities
Threats
Formulate
Strategies
Evaluate
Results
Implement
Strategies

Step 1: Identify the Organization’s Current
Mission, Objectives, and Strategies
Mission: the firm’s reason for being
The scope of its products and services
Goals: the foundation for further planning
Measurable performance targets

Mission (Present State)
Apple is committed to bringing the best personal computing
experience to students, educators, creative professionals and
consumers around the world through its innovative hardware,
software and Internet offerings.
Google’s mission is to organize the world‘s information and make it
universally accessible and useful.
To offer a wide range of home furnishing items of good design and
function, excellent quality and durability, at prices so low that the
majority of people can afford to buy them .
Examples:

Steps 2 and 3
External
Analysis:
Environmental
Assessment
•Macro
•Industry
•Competitive
Threats and
Opportunities
(Top 3 - 4)
Internal
Analysis:
Corporate
Assessment
•People
•Money
•Technology
•Information
Strengths and
Weaknesses
(Top 3 - 4)
Basis for
Future Direction
•Vision
•Mission
•Goals
•Objectives
+ =

Tools for Environmental Analysis
 Macro- (P-E-S-T) analysis
 Scenario planning
 Industry analysis
 Stakeholder analysis
 Technological forecasting

Examples of Macro Trends
 Political: Globalization, deregulation,
privatization, interest groups
 Economic: Trading blocks, convergence,
low inflation, full employment
 Social: Aging population, generation X,
empty-nesters, environmentalism
 Technology: e-commerce, genetics,
miniaturization

Step 3: Conduct an Internal Analysis
Assessing organizational
resources, capabilities, activities, and
culture:
 Strengths (core competencies) create value
for the customer and strengthen the
competitive position of the firm
 Weaknesses (things done poorly or not at
all) can place the firm at a competitive
disadvantage.

SWOT:
Steps 2 and 3 combined are called a
SWOT analysis.
(Strengths, Weaknesses, Opportunities
, and Threats)

Identifying the Organization’s
Opportunities
Opportunities in
the Environment
Organization’s
Opportunities
Organization’s
Resources/Capabilities

Step 4: Formulate Strategies
Develop and evaluate strategic alternatives
Select appropriate strategies that provide
relative advantage over competitors
Match organizational strengths to
environmental opportunities
Correct weaknesses and guard against
threats

Step 5: Implement Strategies
Implementation: effectively fitting
organizational structure and activities to
the environment
The environment dictates the chosen
strategy;
 Effective strategy implementation requires
an organizational structure matched to its
requirements

Exhibit 8-3 Ways to Implement Strategy

Step 6: Evaluate Results
How effective have strategies been?
What adjustments, if any, are
necessary?

New Product / Service Opportunities
Organizational Strategies
New Market Existing Market
New Product
Existing
Product
“New Products for
New Customers”
Extremely Difficult
“New Products to
Existing Customers”
Next Easiest Sales
Opportunity
“Existing Products to
New Customers”
Second Most Difficult
“Bigger Piece of the Pie”
Easiest Sales
Opportunity

Exhibit 8-4 Levels of Organizational
Strategy

Corporate-level Strategies:
Top management’s overall plan for
the entire organization and its
strategic business units.
Types of Organizational
Strategies

Types of Corporate Strategies
Growth: expansion into new products
and markets
Stability: maintenance of the status quo
Renewal: addresses organizational
weaknesses that are leading to
performance declines
Corporate portfolio analysis: involves
a number of businesses; guides resource
allocation
Strategies

Corporate-Level Strategies
Growth Strategy:
Seeking to increase the
organization’s business by expansion
into new products and markets.
Strategies

Types of Growth Strategies:
Concentration
Vertical integration
Horizontal integration
Diversification
Strategies

Growth Strategies
Concentration:
Focusing on a primary line of
business and increasing the number
of products offered or markets
served.
Strategies

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 the
distribution channel and/or provide
customer service activities (eliminating
intermediaries).
Strategies

Horizontal Integration:
Combining operations with another
competitor in the same industry to
increase competitive strengths and
lower competition among industry
rivals.
Strategies

Diversification:
Related Diversification - Expanding by
merging with or acquiring firms in
different, but related industries that are
“strategic fits”.
Unrelated Diversification - Growing by
merging with or acquiring firms in
unrelated industries where higher financial
returns are possible.
Strategies

Corporate-Level Strategies
Stability Strategy:
A strategy that seeks to maintain the status
quo to deal with the uncertainty of a
dynamic environment, when the industry
is experiencing slow- or no-growth
conditions, or if the owners of the firm
elect not to grow for personal reasons.
Strategies

Retrenchment Strategy:
Reduces the company’s activities or
operations
Retrenchment strategies include:
Cost reductions
Layoffs
Closing underperforming units
Closing entire product lines or service
Strategies

Corporate Portfolio Analysis
BCG Matrix
Developed by the Boston Consulting Group
Considers market share and industry growth rate
Classifies firms/products as:
 Cash cows: low growth rate, high market share
 Stars: high growth rate, high market share
 Question marks: high growth rate, low market
share
 Dogs: low growth rate, low market share
Strategies

Exhibit 8-5 The BCG Matrix and Strategic
Implications

These products are at
the end of the product
cycle.
These products are at
the introduction stage
of the product cycle.
These products are at the
growth stage of the
product cycle.
These products are at the
maturity stage of the
product cycle.
BCG Matrix Examples

Business-Level Strategy:
A strategy that seeks to determine
how an organization should compete
in each of its SBUs (strategic business
units). (Example: Unilever’s Dove vs.
Axe)
Strategies

Competitive Advantage:
An organization’s distinctive
competitive edge that is sourced
and sustained in its core
competencies. Is what sets an
organization apart. (Example:
Apple)
Strategies

Forces Driving Industry Competition
Potential New
Entrants
The Industry of
Rivalry among
competitors
Suppliers Customers
Substitutes
Bargaining Bargaining
Power Power
Threat of
Substitute
Products
Buyers/
Distributors
Threat of
New Entrants

Competitive Strategies:
Five Competitive Forces
1. Threat of New Entrants
The ease or difficulty with which new
competitors can enter an industry.
2. Threat of Substitutes
The extent to which switching costs and
brand loyalty affect the likelihood of
customers adopting substitute products and
services.

3. Bargaining Power of Buyers
The degree to which buyers have
the market strength to hold sway
over and influence competitors
in an industry.
Strategies

4. Bargaining Power of Suppliers
The relative number of buyers to
suppliers and threats from substitutes
and new entrants affect the buyer-
supplier relationship.
Strategies

5. Current Rivalry
Intensity among rivals increases
when industry growth rates
slow, demand falls, and product
prices descend.
Strategies

Competitive Strategies
Cost Leadership Strategy
Seeking to attain the lowest total overall
costs relative to other industry
competitors
Differentiation Strategy
Attempting to create a unique and
distinctive product or service for which
customers will pay a premium
Strategies

Focus Strategy
Using a cost or differentiation advantage to
exploit a particular market segment rather than
a larger market
Stuck in the Middle
Organizations that are unable to develop a cost
or differentiation advantage
Strategies

Functional-level strategies support the
business-level strategy.
• Marketing, human resources, research
and development, and finance all support
the business-level strategy
• Problems occur when employees or
customers don’t understand a company’s
strategy
Strategies

Strategic Flexibility:
The ability to recognize major external
environmental changes, to quickly
commit resources, and to recognize
when a strategic decision was a mistake.
Current Strategic Management
Issues

New Directions in Organizational Strategies:
E-Business Strategies:
Online activities: bidding, order processing,
inventory control, recruitment, and hiring.
 Internet-based knowledge systems, online
ordering, and customer support.
 Chat rooms and discussion boards, targeted
web sites.
Current Strategic Management Issues

Issues
Customer Service Strategies:
Giving the customers what they want
Communicating effectively with them
Providing employees with customer
service training

Issues
Innovation Strategies:
Possible Events
Radical breakthroughs in products
Application of existing technology to new
uses
Strategic Decisions about Innovation
Basic research
Product development
Process innovation

Team Assignment
In your teams, please discuss the Johnson’s Case and be
prepared to share your views on the following questions:
• What are the company’s 3 major strengths (they must
not lose)?
• What are the company’s 3 major weaknesses (must get
rid of these)?
• If David can only address 3 -4 major strategic initiatives
successfully during the next 12-18 months, what should
these be?

Team Assignment
In your teams, please discuss the Johnson’s Case and be
prepared to share your views on the following questions:
• What are the major ‘macro-trends’ that will influence
the company’s future strategy?
• What are the major industry and competitive trends that
will influence the company’s strategy?
• As at the time of the case, what do you see as the three
biggest opportunities for Johnson to create growth and
profitability? What do you see as the 3 biggest threats to
the company?

Managing strategically

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