2017

Strategic Management

DR. SANEYA GALALY

CLASS: MBA 52I |

 Strategic Management
Lecture 1

Strategic management:
is a set of managerial decisions and actions that determines the long run performance of a corporation.

 Long run: Depending on industry / It is not a day to day performance nor operational performance.
It includes:
-environmental scanning (both external and internal).
-strategy formulation (strategic or long-range planning).
-strategy implementation
-Evaluation and control.

 The study of strategic management, therefore, emphasizes the monitoring and evaluating of external
opportunities and threats in light of a corporation’s

Phases of strategic management

Phase 1—Basic financial planning
Phase 2—Forecast-based planning
Phase 3—Externally oriented (strategic) planning
Phase 4—Strategic management

Strategic Fit Strategic Stretch

The Company will fit its capabilities
(Resources + Competences) to the
forecasted changes skills of the environment.
example: When you go to the tailor to fit the
suit to your body
Proactive
you get the benefit of the opportunities you
have forecasted
The company is stretching its capabilities to
change the environment (creating opp.).
You’re changing the environment so as to
create opportunities for your firm and others.
example: Apple, Uber & Careem
Proactive
you are the one creating the opportunities

Globalization:
-The integrated internationalization of markets and corporations (removing restrictions and barriers for doing
business around the globe)
-has changed the way modern corporations do business (which led to Interdependence of markets, products,
technology and labors.
 Company not only compete nationally but internationally though you are not leaving your domestic
boundaries.
 In order to survive then you need to have a competitive edge, a sustainable competitive advantage, you
create a competitive advantage and you sustain it always by innovations and improve it and you align it with
your external environment otherwise you’ll be out of business.
Example; Sony imitate but innovate & upgrade (Differentiate your product in the market)

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 Innovation: Creativity + Implementation
Is the implementation of potential innovations that truly drives businesses to be remarkable. i.e. if you didn’t put
a product in the market so u didn’t innovate/ you can reach a certain type of competitive advantage.

 Sustainability: refers to the use of business practices to manage the triple bottom line impact of
sustainability:
The triple bottom line involves:
1.the management of traditional profit/loss. (Economic to still viable)
2.the management of the company’s social responsibility. (CSR)
3.the management of its environmental responsibility. (Green Management)

Theories of organizational Adaptation to the environment:

1) Population Ecology. (Fail to adapt to the environment i.e. companies that doesn’t cope, they perish)
Middle Managers are the Dinosaurs of the 21st Century
2) Institution Theory: Organizations can and do adapt to changing conditions by imitating other successful org.
3) Strategic Choice Perspective: Not only do organizations adapt to a changing environment, but they also have
the opportunity and power to reshape the environment. (Strategic stretch)
4) Organizational Learning Theory: Organization adjusts defensively to changing environment and uses
knowledge offensively to improve the fit between its self and environment.
(Example: some companies have CKO (Chief Knowledge Officer) instead of CIO; how could you use your
knowledge and try to adapt it to give you competitive advantage).
Tacit Knowledge (Not Explicit nor implicit) that gives you a competitive advantage.
 Implicit knowledge creates competitive edge through sharing among the teams where trust is established.

Learning organization: an organization skilled at creating, acquiring and transferring knowledge and at
modifying its behavior to reflect new knowledge and insights.

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 Basic Model of Strategic Management Process

1) Environmental scanning: the monitoring, evaluating and disseminating of information from the external and
internal environments to key people within the organization (SWOT)

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What is the most important thing you do assessment for in an organization:
1. Capabilities = Resources + Competencies
Capabilities: Internal environment (Resources, Strengths, Weaknesses).
2. Culture: The stronger the culture, the more resistant to changes/corporate culture.
3. Structure (the decision making plot either observable or not, follow of authority)/ Power structure.
outcome: strengths and weaknesses (every analysis and assessment We’re looking for strengths and
Weaknesses)

2) Strategy formulation: process of investigation, analysis and decision making that provides the company with
the criteria for attaining a competitive advantage.
-includes defining the competitive advantages of the business (Strategy), crafting the corporate mission,
specifying achievable objectives and setting policy guidelines.

 Mission: the purpose or reason for the organization’s existence

 Vision: describes what the organization would like to become. (Long term Achievable Dream)
 Objectives: the end results of planned activity (SMART) / Goals: (Stretchable i.e. to grow). (WHAT)
 Strategy: forms a comprehensive master approach that states how the corporation will achieve its mission
and objectives / maximizes competitive advantage and minimizes competitive disadvantage /corporate,
business, functional
(HOW would I achieve the objective) / the Vehicle / the way to go.
 Policy: a broad guideline for decision making that links the formulation of a strategy with its implementation.
(Tailored to strategy) / (Do’s & Don’ts)

3) Strategy implementation: a process by which strategies and policies are put into action through the
development of programs, budgets and procedures.

4) Evaluation and control: a process in which corporate activities and performance results are monitored so that
actual performance can be compared with desired performance. (KPIs)
(What to Control/ time of control/ standards/ corrective measures).

A mission to be effective it must include the following 9 components:

1. Customers. Who are your customers? How do you benefit them?

2. Products or services. What are the main products or services that you offer? Their uniqueness?
3. Markets. In which geographical markets do you operate?
4. Technology. What is the firm’s basic technology?
5. Concern for survival. Is the firm committed to growth and financial soundness?
6. Philosophy. What are the basic beliefs, values and philosophies that guide an organization?
7. Self-concept. What are the firm’s strengths, competencies or competitive advantages?
8. Concern for public image. Is the firm socially responsible and environmentally friendly?
9. Concern for employees. How does a company treat its employees?

** Mission Statement Evaluation Matrix.

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 Lecture 2
Hierarchy of Strategy

1) Corporate Strategy: Overall Direction of company & management of

it business. (Stability, grow, retrenchment).

2) Business Strategy: Competitive & Co-Operative strategies

(how to deal with competitors)/(Cost/differentiation).

3) Functional Strategies: How to maximize Resources, Productivity

**Hierarchy: Alignment of all 3 levels

Reasons for Changing the strategy (i.e. Triggering Events)

1) Performance Gap. (if +ve or -ve / when performance doesn’t meet expectations / Sales & Profit either are no
longer increasing or may even be falling e.g. Exceeding Budget)
2) Environmental Changes. Env.
3) External Intervention. (Acquisition/ Merge/New loan/New entities in the board) Shift
4) A leader with a vision / New CEO

Cumulative Changes
5) Threat of Change of Ownership.(Merge)
6) Strategic Inflection Point:
a major change takes place due to in due to the introduction of new
technologies, a different regulatory environment, a change in
customers’ values, or a change in what customers prefer SIP
Drift FLUX
What Makes a Decision Strategic?
deal with the long-term future of an entire organization Time
and have three characteristics:
1) Rare: (In Content & In Time) Strategic decisions are unusual and typically have no precedent to follow.
2) Consequential: Strategic decisions commit substantial resources and demand a great deal of commitment
from people at all levels.
3) Directive: Strategic decisions set precedents for lesser decisions and future actions throughout an
organization.

Mintzberg’s Modes (Ways) of Strategic Decision Making ‫كيقية اتخاذ القرارات‬

-One Man Show. -Adapt to the Changes of the

-Has a Vision and take risk. Environment.
-Take Decision upon Entrepreneurial Adaptive
his gut & Intuition.

-Forecasting. -‫تدريبى و تراكمى‬

- systematic gathering of
appropriate information for
situation analysis.
-Rational selection of the
most appropriate strategy.
Logical - The management follow the
Planning company strategy , then it come
incrementalism out with another strategy based
on the current , then another
strategy based on the current ,
increment through time

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Strategic decision planning process:

1. Evaluate current performance results

2. Review corporate governance
3. Scan and assess the external environment
4. Scan and assess the internal corporate environment
5. Analyze strategic (SWOT) factors
6. Generate, evaluate and select the best alternative strategy
7. Implement selected strategies
8. Evaluate implemented strategies

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 Chapter 2
Corporate Governance
Corporation: a mechanism established to allow different parties to contribute capital, expertise and
labor for their mutual benefit.
The corporation is governed by the board of directors that oversees top management with the
concurrence of the shareholders.
Board of Directors’ Continuum

‫بصمجى‬ ‫محفذ‬

Members of a Board of Directors:

-Inside directors: typically officers or executives employed by the corporation
-Outside directors: may be executives of other firms but are not employees of the board’s corporation
-Agency theory: states that problems arise in corporations because the agents (top management) are not
willing to bear responsibility for their decisions unless they own a substantial amount of stock in the
corporation.
-Stewardship theory: proposes that, because of their long tenure with the corporation, insiders (senior
executives) tend to identify with the corporation and its success
Trends in Corporate Governance:
-Boards shaping company strategy.
-Institutional investors active on boards
-Shareholder demands that directors and top management own significant stock.
-More involvement of non-affiliated outside directors.
-Increased representation of women and minorities.
-Boards evaluating individual directors.
-Smaller boards.
-Splitting the Chairman and CEO positions.
-Shareholders may begin to nominate board members
- Society expects boards to balance profitability with social needs of society (CSR)

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 Chapter 4
Environmental Scanning & Industry Analysis
Some important Variables in the Societal Environment:

**GDP: Gross Domestic Product Whatever produced in Egypt whether Egyptian or foreign.
**GNP: Gross National Product Whatever is produced by Egyptian Nationals.
**Disposable Income the income that you are taking home for spending.
**Discretionary Income  income available for saving.
**Anti-trust law ‫قانون منع األحتكار‬

Some Important Variables in International Societal Environments:

Language – Human Rights – Child Labor – Transportation Network-Currency convertibility-Religion

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 Scanning External Environment

Legal Action
Competition

Ezz Steel
Monopoly

**Market Power > Market Share

**Market Share is a part of Market Power
**Strategic Issue: trend are likely to happen in the future with high degree of probability.
**Strategic Factors: high probability to happen, high impact on the corporation in the future.

After scanning the external environment the company want to check the impact different factors on the
company (Probability Impact Matrix tool can be used)

Probability Impact Matrix:

Impact on Corporation
Probability of Occurance

Accordingly, each issue based on its impact and probability of occurrence has priority to deal with, when an
issue has high impact and high probability of occurrence it become a strategic factor affecting.

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 Lecture 3

Industry Analysis

10 tools are used for Industry Analysis:

1) Porter 5 forces.
2) Industry Classification.
3) Industry Life Cycle.
4) Comparative Industry Structure Analysis (RADAR plot).
5) Types of Industries.
6) Strategic Group Analysis.
7) Market Segments.
8) Miles & Snow Strategic type.
9) Strategic Canvas.
10) Industry Matrix.

1) Porter 5 forces:

 We consider it as 6 but we can plot Labor Union in (Supplier) and Government in (Suppliers or buyers).
 If any of these forces has been ↑increased; it is considered as a threat; i.e. the industry is not attractive.
 If these forces decreased or weak; the industry is considered as an opportunity & the industry is attractive.

I) Potential Entrants (Threat of New Entrants): (Barriers to Entry)

1) Economies of Scale ‫( وفرات الحجم الكبير‬Mass production which leads to decreasing cost) (by firm)
2) Product Differentiation (by firm)
3) Capital Requirements. (by nature of the Industry)
4) Switching Costs (Cost of shifting from one product to another e.g. from IBM to Apple ) (by firm)
5) Access to distribution Channels (by long term excessive agreement) (by firm)
6) Cost Disadvantage due to size (by firm)
7) Government policy (for protecting infant Industry)

 The more the barriers to entry is high ↑  the less threat of new Entrants ↓
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II) Rivalry among Existing Firms (Head to Head Competition)

1) Number of Competitors. ↑  so rivalry depends ↑ or ↓

2) Rate of Industry Growth. ↑  so rivalry ↓
3) Product or Service Characteristics. ↑  so rivalry ↓
4) Amount of fixed costs. ↑  so rivalry ↑
5) Capacity. ↑  so rivalry ↓
6) High of exit Barriers. ↑  so rivalry ↑
7) Diversity of rivals. ↑  so rivalry ↑
No Competition Low Entry Low Exit
Low Competition High Entry Low Exit
High Competition High Entry High Exit
The Most Competition Low Entry High Exit

III) Threat of Substitutes (Supplier Demand)

-a product that appears to be different but can satisfy the same need as another product
-The identification of possible substitute products means searching for products that can perform the same
function, even though they have a different appearance.

IV) Bargaining power of buyers. (The buyers want lower price & high quality)

-If I buy 80% of your production  so I’ve a high bargaining power.

-If buying tailored product specially for him.
-Product Value Chain
‫رويال‬ ‫السالب‬ ‫كليوباترا‬

Raw Material Production Final Goods Distribution Retailer

Vertical Integration Strategy

Backward Forward

 El Salab has high bargaining power over Cleopatra because he has also Royal ceramic; i.e. so whenever
the buyer has the ability of know-how and finance to integrate backward and be my competitor, so am as
a supplier has high bargaining power.
 Vice Versa; Cleopatra has a retailer and is supplier to EL-Salab has a high bargaining power.
-Ability of buyers to force prices down, bargain for higher quality and play competitors against each other
-Large purchases, backward integration, alternative suppliers, low cost to change suppliers, product represents a
high percentage of buyer’s cost, buyer earns low profits, product is unimportant to buyer

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Forward and backward Vertical Integration:
Salab is distributor made backward vertical integration and became manufacturer for Royal Ceramic , Abo el
Einen is a ceramic manufacturer and did forward vertical integration and distributed his products in his own show
rooms.
This tool is used to analyze the company position and the forces that affect it

V) Bargaining power of suppliers. (The supplier want to buy at higher price with higher margin of profit)
-Buyers affect an industry through their ability to force down prices, bargain for higher quality or more services
and play competitors against each other.
A buyer or a group of buyers is powerful if some of the following factors hold true:
-Industry is dominated by a few companies
-Unique product or service.
-Substitutes are not readily available.
-Ability to forward integrate.
-Unimportance of product or service to the industry

The VALUE NETWORK: (how you are connected to suppliers & distributers & customers to add value to customers.)
-E.g. Samsung & Apple; Samsung is a supplier of apple, They are Customers, Competitors, Complimentary with
each others.

Relation between Sony and Apple:

Sony supply apple with lithium batteries
Sony competes apple (Ipod Vs Walkman)
Sony complement apple ( Sony Music used in ipod)

Extending Industry Analysis:

- Linking Macro-economics to industry Analysis.
-Sustainability (potential changes, introduction or bargaining power of new technologies).
-Industry profitability.
-Level of industry turbulence.
Ansoff classification: repetitive, expanding slow / incremental changing fast / incremental discontinuous /
/predictable, surpriseful discontinuous / unpredictable)

2) Industry Classification:
1) Fragmented industry: no firm has a large market share and each firm only serves a small piece of the total
market in competition with other firms (many players) ‫البقالة‬
2) Consolidated industry: domination by a few large firms, each struggles to differentiate products from its
competition (few players) ‫األسمنت‬

3) Convergent: 2 industries are convergent into 1. e.g. Airlines +Booking hotels

4) Divergent: 1 industry is splitting into 2. e.g. oil + gas

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5) Multi-domestic industries: specific to each country or group of countries (Customization)
i.e. product distributed according to specific need.

6) Global industries: operate worldwide with multinational companies making only small adjustments for
country-specific circumstances (Standardization)
i.e. Same product sold everywhere.

7) Regional industries: multinational companies primarily coordinate their activities within regions

3) Industry Life Cycle:

Development Growth Shake-out Maturity Decline

Low rivalry: Low rivalry: Increasing rivalry: Stronger buyers: Extreme rivalry
High differentiation High Growth & Slower Growth & low Growth &
weak buyers some exits standard products
managerial &
financial strength

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4) Comparative Industry Analysis: (plotting Porter 5 forces on a RADAR plot)
Objectives:
1) Comparison for attractiveness between 2 industries.
2) Comparing same industry over time. i,e. forecasting the future.
 If the high in the middle, the smaller the surface,
the unattractive industry.
 I’ve to define where exactly is the high.

5) Types of Industry:

1) Monopolistic
2) Oligopolistic
3) Perfectly Competitive
4) Hyper competitive Industry; they are characterized by:
-Short life cycle.
-Market leader of today is not the market leader of tomorrow.
 there are a lot of turbulence & disturbances.
Market stability is threatened by short product life cycles,
short product design cycles, new technologies, Strategic
frequent entry by unexpected outsiders, Gap/
repositioning by incumbents and tactical redefinitions Opportunity
of market boundaries as diverse industries merge.

6) Strategic group Analysis:

Objectives:
1) Identify your direct competitor.
2) Identify strategic gap or opportunities for investments.
Strategic
3) Identify groups to move from one group to another. Gap/
Opportunity

7) Market Segments:
You segment the market according to age, gender,…

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8) Strategic Types (Miles & Snow typology):

1) Defender: (BIC)
-focus on improving efficiency
-Most of the firms follow this type; i.e. they are defending their Market share.
 when you’ve stable environment so you can reach both

2) Prospectors: (e.g. investment in Iraq) (3M)

-focus on product innovation and market opportunities and take higher risks
 when you have unstable environment

3) Analyzers: (IBM, P&G)

-focus on at least two different product market areas
If you’ve more than one product and operating in more than one market.
In the Stable area, efficiency is emphasized, in variable area innovation is emphasized.

4) Reactors:
-lack a consistent strategy-structure-culture relationship.
-No Clear Strategic line; they are waiting their competitors to act in order to react.

9) Strategic Canvas:

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 Lecture 4
10) Industry Matrix

Key Success Factors:

-Are those factors that are necessary for any organization to stay in business in a given industry i.e. all
companies that play in the same industry must have the key success factor in order to survive.
-The more you are success in the key success factor, the more competitive you are.
-I check the performance of one company in compared to another company.

Common Types of Key Success Factors

-Technology Related KSFs.
-Manufacturing Related KSFs.
-Distribution Related KSFs.
-Marketing Related KSFs.
-Skills Related KSFs.
-Organizational Capability.
-Other types of KSFs

10) Industry Matrix

Vodafone Orange Itsalat

Key Success Factor Weight Rate Weighted Score Rate Weighted Score Rate Weighted Score
Network Coverage 0.15 3 0.45
Customer Service 0.10 4 0.40
Prices 0.05 3 0.15
Marketing Skills 0.05 5 0.25 (Capitalize)
Quality of Services 0.10 2 0.20 (Work on it)
Distribution Net. 0.10 4 0.40
Data Services 0.10 4 0.40
Financial Position 0.15 5 0.75
Skilled Workers 0.05 5 0.25
Brand 0.05 5 0.25
Technology 0.20 4 0.40
Total Scores 1.00 3.90

N.B: they are all internal Factors; I can control it / the average is 3.

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Competitive intelligence:
-a formal program of gathering information on a company’s competitors
-also called business intelligence

Sources of competitive intelligence:

-Information brokers.
-Internet.
-Industrial espionage.
-Investigatory services

Porter Diamond Model: (Assessing International Competitiveness) (Snowball Effect)

Porter called the answers to these questions the determinants of national competitive advantage. He suggested that
there are four main factors which determine national competitive advantage and expressed them in the form of a
diamond.

(e.g. Switzerland in Banking)

1) Factor Condition / Endowment: (Switzerland in the middle of Europe)
Favorable factor conditions include the following:
(I)physical resources such as land, minerals and weather
(ii) capital
(iii)human resources such as skills, motivation, price and industrial relations
(iv)knowledge that can be used effectively
(v) infrastructure.

2) Firm Strategy (Growth):

Organizational goals can be determined by ownership structure. Unquoted companies may have slightly longer
time horizons to operate in because their financial performance is subject to much less scrutiny than quoted
companies. They may also have different 'return on capital' requirements.

3) Demand Conditions:
There must be a strong home market demand for the product or service. This determines how industries perceive
and respond to buyer needs and creates the pressure to innovate. A compliant domestic market is a disadvantage
because it does not force the industry to become innovative and excellent.

4) Related and supporting industries

the success of an industry can be due to its suppliers and related industries.

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Industry Analysis for the Public Sector: 3 different types of public sector Organization:
1) Organization with policy making aims and no products or services. ‫الحكومة‬
2) Organization implementing.
3) Organization with products & Services with or without competitors.

Not for profit Industry Analysis:

-Assess the role of key Stakeholders.
-Objectives are determined by key executives, key donors, or best customer outcomes.

Useful forecasting technique:

Extrapolation Brainstorming Expert opinion

Delphi Statistical Prediction

technique modeling markets

Cross impact
analysis

1) Extrapolation: assuming that same condition now will be the same conditions of the future.
2) Brainstorming: get some people, raise the problem, everyone say his/her opinion.
Rules: 1) quantity is more important than quality i.e. the more ideas you generate, the better it is.
2) No body owns the idea.
3) Delphi technique: to circulate the idea anonymously among ppl, and everyone is perfecting the idea, adding
to the idea until you reach consensus.
4) Statistical Modeling: Cause & Effect.
5) Prediction Markets. (e.g. Crops)
6) Expert Opinion.
7) Cross impact analysis: a change in one thing will lead to a change reaction. (e.g. currency fluctuation)

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Synthesis of External Factors—EFAS

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 Chapter 5
Internal Scanning: Organizational Analysis

Organizational analysis: concerned with identifying and developing an organization’s resources and
competencies

Core and Distinctive Competencies:

Resources:
-an organization’s assets and are thus the basic building blocks of the organization.
-tangible, intangible

Capabilities:
-refer to a corporation’s ability to exploit its resources.
-consist of business processes and routines that manage the interaction among resources to turn inputs into
outputs

Core competency:
-a collection of competencies that cross divisional boundaries, is wide-spread throughout the corporation and is
something the corporation does exceedingly well
 I might have a core competency same as my competitors
 I might have or not have a distinctive competency

-Distinctive competency:
core competencies that are superior to those of the competition
 I’ve to distinguish my core competency than others  I must have a core competency

Core competency e.g. MacDonald’s

VRIO (VRINE) framework

Distinctive competency (I’ve competency better than my competitor / I’ve a competitive edge) e.g. Aldi
If my competitors had the same distinctive competency, I’ve to make sustainability.

Durability
Sustainability
Imitability  transparency/ Transferable / Replicability
e.g. ZARA

VRIO framework:
1) Value: Does it provide customer value and competitive advantage?
2) Rareness: Do no other competitors possess it?
3) Imitability: Is it costly for others to imitate?
4) Organization: Is the firm organized to exploit the resource? ‫األستغالل‬

VRINE
5) non-substitutable
6) Exploitable

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Determining the Sustainability of an Advantage

-Durability: the rate at which a firm’s underlying resources, capabilities or core competencies depreciate or
become obsolete

-Imitability: the rate at which a firm’s underlying resources, capabilities or core competencies can be duplicated
by others

-Transparency: the speed at which other firms under the relationship of resources and capabilities support a
successful strategy

-Transferability: the ability of competitors to gather the resources and capabilities necessary to support a
competitive challenge

-Replicability: the ability of competitors to use duplicated resources and capabilities to imitate the other firm’s
success

Determining the Sustainability of an Advantage

Explicit knowledge: knowledge that can be easily articulated and communicated (published to everyone)

Tacit knowledge: knowledge that is not easily communicated because it is deeply rooted in employee
experience or in the company’s culture (published to employee but not outside)

Business Models

Business model:
-a company’s method for making money in the current business environment.
-includes the key structural and operational characteristics of a firm—how it earns revenue and makes a profit.

A business model is usually composed of five elements:

-Who it serves.
-What it provides.
-How it makes money.
-How it differentiates and sustains competitive advantage.
-How it provides its product/service

 You can adapt and NOT Adopt business model of another company to the external environment of your
company (you cannot copy & paste)

Some of the many possible business models are:

-Customer solutions model.
-Profit pyramid model.
-Multi-component system/installed model.
-Advertising model
-Switchboard model

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 Lecture 5
Value Chain Analysis

Value chain: a linked set of value-creating activities that begin with basic raw materials coming from suppliers,
moving on to a series of value-added activities involved in producing and marketing a product or service and
ending with distributors getting the final goods into the hands of the ultimate consumer. (product value chain)

 I ‘ve to identify my location in the Value chain & either I’ll make backward or forward Vertical
Integration.

A Corporation’s Value Chain:

I want to
increase the
Vertical Profit Margin
Linkage

Horizontal Linkage gaining more quality

 In any companies, there are 2 sets of activities;

1) Primary Activities: one related to the product (front of the house).
2) Support Activities: one not related to the product but the company cannot live without it (Back of the
house).

 Economies of Scope: ‫( اقتصاديات النطاق‬you’ve several product lines sharing the same resources)

 Economies of Scale: (Mass production leading to decrease cost)

 Does competitors know what happens inside the company?

CASUAL Ambiguity; i.e. my competitor can’t know why I’m successful.
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 “Differences among competitor value chains are a key source of competitive advantage.”
1 . Examine each product line’s value chain in terms of the various activities involved in producing the product or
service
2 . Examine the linkages within each product line’s value chain (for example, marketing) is performed and the
cost of performance of another activity (for example, quality control)
3 . Examine the potential synergies among the value chains of different product lines or business units This is an
example of economies of scope, which result when the value chains of two separate products or services.

Basic Organizational Structures

Simple Functional Divisional

Strategic
Conglomerate
Business Units

1) Simple: Owner Manager + Co-workers.

2) Functional: It is appropriate for a medium sized firm with several product lines in one industry. (many
departments (finance, Marketing,….)
3) Divisional: It is appropriate for a large corporation with many product lines in several related industries.
4) Strategic Business Units: BU that might have different objective than corporate level.
5) Conglomerate: It is appropriate for a large corporation with many product lines in several unrelated
industries. Sometimes called a holding company. (holding company structure of unrelated Business units. ‫طلعت‬
‫بهجت‬... ‫)مصطفى‬

Corporate Culture: The Company Way

 What is important is: whether the Culture is strong or not? / Analysis: Strategy-cultural compatibility.
whether you want to change culture or the strategy?

-Cultural intensity: the degree of which members of a unit accept the norms, values and other cultural content
associated with the unit (shows the culture’s depth)‫تقبل الثقافة‬

-Cultural integration: the extent of which units throughout the organization share a common culture
(culture’s breadth)‫ على المستوى الجغرافى زى بعض‬/ ‫التوحيد و النور فى القاهرة و األسكنرية‬

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Strategic Marketing Issues:

1) Market position- refers to the selection of specific areas for marketing concentration and can be expressed in
terms of market, product and geographic locations

2) Marketing Mix- the particular combination of key variables under a corporation’s control that can be used to
affect demand and to gain competitive advantage

3) Product life cycle: a graph showing time plotted against the sales of a product as it moves from introduction
through growth and maturity to decline.

4) Brand: a name given to a company’s product which identifies that item in the mind of the consumer

5) Corporate reputation: a widely held perception of a company by the general public (how the stakeholders
perceive us)

Strategic Financial Issues:

1) Financial leverage: 1) ratio of total debt to total assets / 2) describes how debt is used to increase earnings
available to common shareholders

2) Capital budgeting: 1) the analyzing and ranking of possible investments in fixed assets in terms of additional
outlays and receipts that will result from each investment.

Strategic R & D Issues:

1) R&D intensity: spending on R&D as a percentage of sales revenue / principal means of gaining market share
in global competition

2) Technology transfer: the process of taking new technology from the laboratory to the marketplace

R&D Mix:

1) Basic R&D: focuses on theoretical problems (differentiation)

2) Product R&D: concentrates on marketing and is concerned with product or product packaging improvements
(differentiation)

3) Engineering R&D: concerned with engineering, concentrating on quality control and the development of
design specifications and improved production equipment (decrease cost)

Technology discontinuity: (S-Curve)

when a new technology cannot be used to enhance current technology, but substitutes for the technology to
yield better performance 5G
Cumulative Technology

4G
(as a technology become mature, I’ve to introduce another one
while the current technology still current)

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Strategic Operations Issues:
-Intermittent systems: item is normally processed sequentially, but the work and sequence of the process vary.
(‫بخلص حاجة و ابدأ فى اللى بعدها‬..... ‫زى السمكرة و الدوكو‬

-Continuous systems: work is laid out in lines on which products can be continuously assembled or processed

-Operating leverage: impact of a specific change in sales volume on net operation income

Experience curve: unit production costs decline by some fixed percentage each time the total accumulated
volume of production units doubles

(as Experience inc., cost will dec.)

Cumulative Experience
Strategic HR Issues:
Increasing Use of Teams
-Autonomous (self-managed):a group of people work together
without a supervisor to plan, coordinate and evaluate their work

-Cross-functional work teams: various disciplines are involved Time

in a project from the beginning

-Concurrent engineering: specialists work side-by-side and

Cost
compare notes constantly to design cost-effective products
with features customers want

-Virtual teams: groups of geographically and/or organizationally

Time
dispersed co-workers that are assembled using a combination of
telecommunications and information technologies to accomplish an organizational task
(working from Home or from other countries).

Quality of Work Life and Human Diversity: (balance between personal needs & work needs)
Quality of work life includes improvements in:
-Introducing participative problem solving.
-Restructuring work.
-Introducing innovative reward systems.
-Improving the work environment

Human diversity:
-the mix in the workplace of people from different races, cultures and backgrounds.
-provides a competitive advantage / diversity of religious, gender, age, culture.

Strategic Information Systems/Technology Issues:

-Supply chain management: the forming of networks for sourcing raw materials, manufacturing products or
creating services, storing and distributing the goods and delivering them to customers and consumers

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Internal Factor Analysis Summary (IFAS):

Strategic Factor Analysis Summary (SFAS):

-if the weight > 1.00, so we’ve to reweight & never ever change the Rate.
-The total weighted score  indicates strategic position and SWOT analysis.

TOWS Matrix;

Black Box

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 Lecture 6
Chapter 7
Strategy Formulation: Corporate Strategy

Corporate Strategy: overall directional of the organization

Business strategy: how to deal with your competitors
Functional Strategy: strategy of each department

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Corporate Strategy:
1) Directional Corporate Strategy: the firm’s overall orientation toward growth, stability or retrenchment.
-applied to any size of organizations whether it is one product/ one market (Single BU) or multiple product /
multiple markets (Multiple Business Organization).

2) Parenting Corporate Strategy: the manner in which management coordinates activities and transfers
resources and cultivates capabilities among product lines and business units.

-apply only on Multiple Business Organization i.e. related to the relationship between corporate parent and the
business unit whether it is achieved synergy or alignment also it increases or destroy the value of Business unit

3) Portfolio Corporate Strategy: industries or markets in which the firm competes through its products and
business units.
-apply only on Multiple Business Organization i.e. as if you’ve a portfolio monetary assets  sell something 
get money from it  but this money in another unit (Distribution of cash among the units).

1) Directional Corporate Strategy:

A) Growth Directional B) Stability Directional C) Retrenchment Directional

Corporate Strategy:
I) Concentration Growth
Directional Corporate Strategy:
(Grow in the same industry)
i. Vertical Growth: I’m growing
along the value chain either
backward or forward integration.
ii. Horizontal Growth: Through
Increase Market Share (Market
penetration, market development,
product development, merge)
II) Diversification Growth
Directional Corporate Strategy:
(investing in another industry)
i. Concentration: investing in
related product (by product &
Complementary products)
ii. Conglomerate: investing in
unrelated product ( a company
working in real estate and then
diversified in food industry ,
industry total different)
e.g. Talaat Moustafa
(Madinaty & Lamar)
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Corporate Strategy:
I) Pause / Proceed with Caution.
‫ تحرك بحظر‬/ ‫أثبت‬
-Temporary strategy taken in case
of ambiguous environment.
-If the company don’t want to
grow; it freezes / pauses after that
they may grow or retrench;
depending on the environment
changes.
II) No Change.
-When the company don’t want to
take risk for growth or
retrenchment.
-I want to promote same product
and serve the same market.
-Long-term Strategy. (e.g. biscato)
III) Profit.
- you’re showing artificial profit on
an normal financial statement,
By cancelling minor investments or
decreasing discretionary expenses.
(e.g. no new car for CEO)
Corporate Strategy:
I) Turn around
-Turn a company from being a losing
company to a break even making
company (inc. revenue & dec. cost)
e.g. Carlos Ghosn.
II) Captive
-Long term exclusively agreement
between buyer & Supplier.
- Secure constant income like hotels
and tourism industry in Egypt, they
might offer very low prices to ensure
continuity of revenue and income to
cover the operating costs.
III) Sell out = Being acquired
-Selling an operating business.
(Ex: Omar Afandy)
IV) Divestment (Partial Sell)
-Sell a branch or a BU.
V) Liquidation (Co. doesn’t exist)
- the business owner decided to close
the business or the losses are
becoming more than the profits.
-Done by Professional Liquidator.
VI) Bank Ruptcy (Co. doesn’t exist)
- by government agent, laws liquidate
the company assets by the value as he
evaluate it/preceded by Insolvency
-Done by the Court.
 A + B AB Joint Venture
A + B A Acquisition
A + B AB Merge

International Entry Strategies:

1. Exporting: reduce the once formidable costs of going international.

2. Licensing: Under a licensing agreement, the licensing firm grants rights to another firm in the host country to
produce and/or sell a product. This is an especially useful strategy if the trademark or brand name is well known,
but the company does not have sufficient funds to finance its entering the country directly

3. Franchising: Under a franchising agreement, the franchiser grants rights to another company to open a retail
store using the franchiser’s name and operating system. Franchising provides an opportunity for a firm to
establish a presence in countries where the population or per capita spending is not sufficient for a major
expansion effort.

4. Joint Ventures: Forming a joint venture between a foreign corporation and a domestic company is the most
popular strategy used to enter a new country. Companies often form joint ventures to combine the resources
and expertise needed to develop new products or technologies. A quick method of obtaining local management,
it also reduces the risks of expropriation and harassment by host country officials. A joint venture may also
enable a firm to enter a country that restricts foreign ownership. (India & Carreffour)

5. Acquisitions: A relatively quick way to move into an international area is through acquisitions— purchasing
another company already operating in that area. Synergistic benefits can result if the company acquires a firm
with strong complementary product lines and a good distribution network.

6. Green-Field Development: If a company doesn’t want to purchase another company’s problems along with its
assets, it may choose green-field development and build its own manufacturing plant and distribution system.
Research indicates that firms possessing high levels of technology, multinational experience, and diverse
product lines prefer green-field development to acquisitions (Nissan Honda BMW)

7. Production Sharing: process of combining the higher labor skills and technology available in developed
countries with the lower-cost labor available in developing countries. Often called outsourcing

8. Turnkey Operations: are typically contracts for the construction of operating facilities in exchange for a fee.

9. BOT Concept: (Build, Operate, Transfer) concept is a variation of the turnkey operation. Instead of turning
the facility (usually a power plant or toll road) over to the host country when completed, the company operates
the facility for a fixed period of time during which it earns back its investment plus a profit. It then turns the
facility over to the government at little or no cost to the host country

10.Management Contracts: A large corporation operating throughout the world is likely to have a large amount
of management talent at its disposal. Management contracts offer a means through which a corporation can use
some of its personnel to assist a firm in a host country for a specified fee and period of time.
(Management fees / Incentive fees)

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 2) Portfolio Corporate Strategy:

General Electric International Portfolio

BCG Matrix
(GE) Matrix Matrix

 They are analytical tools that generates strategy.

1) BCG Matrix: (based on the PLC theory) (depends on Relative Market Share & industry growth)
 we introduce New Product in a Growing Market.
Assumption:
1. Based on industry Growth rate increase
2.Company market share

In a growing Market

-Market leaders are at -Need Cash for Development.

the peak of their PLC -Money Taken from Mature
Products

-When it reaches Mature

or saturation phase. -When the market starts to
-The product is a market decline. This CC loses its
leader but there is no Market leader position
room for improvement
Not in a growing Market

 Each Circle represents a BU.

 The area of the circle represents the contribution of
the BU to the overall revenue of the company.

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2) GE Matrix: (Complicated)
Includes 9 cells based on long-term industry
attractiveness and business strength competitive
position,

 Assess industry attractiveness through:

1) Market GR.
2) Industry Profitability.
3) Size of Industry.
4) Pricing Strategy.

 The area of the circle represents the output

of the whole market

 Stars  Winners
 Cash Cow  Product Producer (Market leader in unattractive Market)
 Dogs  Losers
 In the middle  case by case.

3) International Portfolio Matrix:

 Only if the company is operating in more than one country.

 Based on 2 factors:
1) country attractiveness
2) product’s competitive strength

• Country attractiveness is composed of market size,

market growth rate, extent and type of government regulations

• Product’s competitive strength is composed of its market share,

product fit, contribution margin and market support

• Depending on where the product fits on the matrix,

it should receive more funding or be harvested

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 3) Parenting Corporate Strategy:

Parenting Fit Matrix:

a tool to assess the Synergy / alignment between

Negative Influence of Corporate Parent on BU

corporate Parent and Business Unit.

-Heartland: High positive from corporate

and very less negative from corporate, (Star)

-Edge of heartland: moderate and moderate

But still the bottom line is positive.

- Ballast: ( Huge weight that keep a ship balanced

in deep water ‫)التقيلة‬: Very low positive and
very low negative i.e. no room for improvement
(Cash Cow)

- Alien Territory: High Negative, Low Positive ,

therefore belonging this BU to corporate is Positive Influence of Corporate Parent on
harming this business unit and the company should BU
sell this business unit. (Dog)

- Value Trap: Very high positive and very High negative

(some time called problem child) you don’t know whether
this child will grow profitable or losing (Question Mark)
 N.B: Be aware of Arrow Directions

Summary
2) Portfolio Corporate Strategy: 3) Parenting Corporate Strategy:
1) BCG Matrix 2) GE Matrix: 3) International **Parenting Fit Matrix:
Portfolio Matrix:

The area of the circle The area of the circle

represents the represents the output
contribution of the BU to of the whole market
the overall revenue of the
company.
-Industry Growth. -Industry Attractiveness. -Country Attractiveness - +ve/-ve Influence of Corporate
-Relative Market Share -Business Strength -Competitive Strength Parent on BU.
Competitive Position
apply only on Multiple Business Organization
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 Lecture 7
Chapter 6
Strategy Formulation: Situation Analysis and Business Strategy

Business Strategy:
focuses on improving the competitive position of a company’s or business unit’s products or services within the
specific industry or market segment that the company or business unit serves

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 1) Competitive Business Strategy:
i) Porter’s Generic Competitive Strategy
(based on cost)
Through VRIO
e.g. Geely e.g. Toyota
Geographically
-Lower cost: produce same product of competitors
at lower cost, if you achieve lower cost , you can sell
at same price of competitors and enjoy higher profit
or you can sell at lower price and compete on base
of price
-Differentiation: same product of competitors but
your product is perceived as better or higher quality
( it might be better or not it’s a matter of perception)
1.the customer will buy your product at same price
of competitor
2.Customer buys your product at higher price with
price premium justified
(e.g. Value Creation concept)
-If you’re targeting mass market the strategy will be
cost leadership,
if you’re targeting narrow market it’ll be called cost
Focus
-The company then have to choose strategy either
compete on base of cost or on the base of
differentiation, some companies get stucked in the
middle and other calls it best cost provider.
-Hybrid: combing low cost + differentiation.
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ii) The Strategy Clock:
(based on price)
1) No frills: (Extras) very basic product with low price.
2) Low Price: Price for Value
3) Hybrid**:
4) Differentiation: Higher price for higher perceived
quality product
5) Focused Differentiation:
6,7,8)Strategies destined for Ultimate future:
Unless you are monopolistic or there is a collusion.
6) e.g. FMCGs  Collusion
7) e.g. Cigarettes  Same Quality at higher price
Monopoly
8) e.g. Electricity & water  Higher Quality/Higher Price
Monopoly
** Hybrid:
- low cost product invested in R&D to increase the quality of
this product, so you’re starting to sell it at a higher price.
-High Quality product with lower priced than competitors.
-selling low price product at higher quality than
competitors.
Example: TOYOTA
Route 1 : 1960s; introducing low cost/low added value car
in Europe
Route 2 : 1970s and early 1980s, improved quality,
equivalent to European competitors, however sold cheaper.
Route 3 : late 1980s competitively priced cars, better
quality than their competitors
Route 4 : mid 1990s differentiated products by providing
extra features. However by 2000 competitors catched up
Route 5 : Toyota’s Lexus model
Route 8 : Nissan controlling share bought by Renault which
developed the products, and made Nissan successful again.
Requirements of Generic Competitive Strategies
Generic Strategy Commonly required skills and resources
Overall Cost  Sustained capital investment and
Leadership access to capital
 Process engineering skills (R&D)
 Intense supervision of labor
 Products design for ease of
manufacture
 low cost distribution system
Differentiation  Strong marketing abilities
 Product engineering
 Creative flair
 Strong capability in Basic research
 Corporate reputation for quality
 Long tradition in the industry
 Strong cooperation from channels
Focus  Combination of the above policies
directed at the particular strategic
target.
Risks of not sustaining Generic Competitive Strategies
Risks of Cost leadership Risks of Differentiation
-Cost leadership is not sustained: -Differentiation is not
-Competitors Imitate sustained:
-Tech. Changes -Competitors Imitate
-Other bases for cost leadership -Bases of differentiation
erode. become less important to
buyers
-Proximity in differentiation is -Cost proximity is lost (Gap
lost. between low cost and
differentiated.
-Cost focuses achieve even lower -Differentiation focuses
cost in segments. achieve even greater
differentiation in segments.
N.B: Proximity: Closeness between low cost + differentiation ‫مدى القرب‬
35 | P a g e
Common Organizational requirements
 Tight cost control
 Frequent, detailed control reports
 Structured organization and
responsibilities
 Incentives based on meeting strict
quantitative targets.
 Strong coordination among
functions in R&D (P&B), product
development and marketing.
 Subjective measurement and
incentives instead of quantitative
measures.
 Amenities to attract highly skilled
labor, scientist, or creative people.
Combination of the above policies
directed at the particular strategic
target.
Risks of Focus
-The focus strategy is imitated:
-The target segment becomes
structurally unattractive:
-Structure erodes
-Demand disappears
-Broadly targeted competitors
overwhelm the segment:
-The segment’s differences from
another segments narrow.
-The advantages of a broad line
increase
-New focuses sub segment the
industry
The Toyota and Honda auto companies are often presented as examples of successful firms able to achieve both of these
generic competitive strategies. Thanks to advances in technology, a company may be able to design quality into a product or
service in such a way that it can achieve both high quality and high market share—thus lowering costs.
(Eight Dimensions of Quality)
1. Performance : operating characteristics
2. Features : supplement to basic functions
3. Reliability: no need for significant repair
4. Conformance: meeting standards
5. Durability: number of years of service
6. Serviceability: ease of repair
7. Aesthetics: how the product looks, feels, sounds, tastes, smells
8. Perceived Quality: overall reputation

2) Corporation Business Strategy:

Cooperative strategies are used to gain competitive advantage within an industry by working with other firms.

i) Collusion
It is the active cooperation of firms within an industry to reduce output and raise prices in order to get around
the normal economic law of supply and demand. Collusion may be explicit, in which firms cooperate through
direct communication and negotiation, or tacit, in which firms cooperate indirectly through an informal system
of signals.

ii) Strategic Alliances

It is a partnership of two or more corporations or business units to achieve strategically significant objectives
that are mutually beneficial.

Companies or Business Units may form a strategic alliance for a number of reasons including;
1) To obtain technology and/or manufacturing capabilities;
2) To obtain access to specific markets;
3) To reduce financial risks
4) To reduce political risks
5) To achieve or ensure competitive advantage.

Mutual Service Consortia
Is a partnership of similar
companies in similar
industries who pool their
resources to gain a benefit
that is too expensive to
develop alone, such as
access to advanced
technology.
Strategic Alliances
Joint Venture
Is a cooperative business
activity, formed by two or
more separate
organizations for strategic
purposes, that creates an
independent business
entity and allocates
ownership, operational
responsibility, and financial
risks and rewards to each
member, while preserving
their separate identity.
Licensing Agreement
Is an agreement in which
the licensing firm grants
rights to another firm in
another country or market
to produce and/or sell a
product. The licensee pays
compensation to the
licensing firm in return for
technical expertise.
Value chain Partnership
is a strong and close
alliance in which one
company or unit forms a
long term arrangement
with a key supplier or
distributor for mutual
advantage.

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 Acquisition

Reasons for Acquisition:

-to increase market power is influencing the market and becoming powerful market player
-To overcome entry barriers: example you want to enter a company that don’t allow foreigners to acquire
assets, then you acquire a local company by 49% (like in Saudi Arabia)
-Cost of new product development: like in pharmaceutical companies, instead of paying expenses for
development a new product, the company acquires a successful existing one

Benefit acquisition:
once acquisition occurs the next minute you’re in the market

-Acquiring a new company might be for diversification

-acquire a competitor to avoid competition ( Horizontal acquire)

Problems of Acquisitions:
-Integration difficulties: Mercedes-Benz & Chrysler demerge for technical issue due to difference between
American and German cultures
-General Motors acquired Fiat for gaining the knowhow of small cars , once they had it a de-merge occurred
-Too much diversification: managers are unable to control much diversified business

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Strategy Formulation: Functional Strategy & Strategic Choice
Marketing Strategy
Financial Strategy
R&D Strategy &
Competitive Advantage
Purchasing Strategy
HR Strategy
Logistics Strategy
IT Strategy
38 | P a g e
Chapter 8
 It deals with pricing, selling, & distributing a product.
 Market development strategy
 Product development strategy
 Advertising & Promotion: "push" or "pull" marketing strategy.
 Pricing: Skim pricing, penetrating pricing Strategy
 Examines the financial implications of corporate & business- level strategic
options & identifies the best financial course of action.
 Financial strategy usually attempts to maximize the financial value of the
firm
 Business Cost Leadership
-Pioneer  Develop low Cost (Alignment bet. Business & Function)
-Follower  Imitate (Avoid R&D cost)
 Business differentiation
-Pioneer  Innovate
-Follower  Imitate / Adapt
 Sole sourcing: relies on only one supplier for a particular part
(to obtain high supplier Quality) (high bargaining/ Discounts)
 Multiple sourcing: the purchasing company orders a particular part from
several vendors (adv.: No one controlling me / Dis.: Price)
(low bargaining/ No Discounts)
 Parallel sourcing: two suppliers are the sole suppliers of two different
parts, but they are also backup suppliers for each other’s parts.
 JIT (Just in time): purchases parts arrive at the plant just when they are
needed (Infra-structure/ Supply Chain Management)
 Either train idiots with no /low Salary.
 Hire qualified labor with high salary.
 Working in team (autonomous or no/ cross-functional or no).
 Work-life Balance.
 Work Diversity.
 Centralized or Decentralized
 “Follow the Sun Management” :
-applicable in different time zones. (US, Egy, China working at 4:00 a.m)
-Dis: Language
Carlos Ghosn Solved this prob. By unifying English language for Fr. & Jap.
-Outsourcing: -purchasing from someone else a product or service that had been previously provided internally.
(Making  Stop Making  Buying)

 Role: Never Ever outsource activities that contributes to your core competitive advantages.
-Outsource only Marginal Activities.

Proposed Outsourcing Matrix

Buy some & Make some

In-House

Seven Major Outsourcing Errors:

1) Outsourcing the wrong activities.
2) Selecting the wrong vendor.
3) Writing a poor contracts.
4) Overlooking personnel issues.
5) Lack of control.
6) Overlooking hidden costs.
7) Lack of an exit strategy

Strategies to Avoid:
1) follow the leader.
2) Hit another Home Run. ‫عايز تكسب بسرعة‬
3) Arms Race.
4) Do everything.
5) Losing Hands

(SM replies on predictability “Bluff & counter-bluff” (Game theory)

39 | P a g e
 Lecture 8
Analytical tools

Related to Space Matrix, (so read during SPACE Matrix)

Factors That Make Up the SPACE Matrix Axes

40 | P a g e
 1) Internal-External (IE) Matrix: 2) Grand Strategy Matrix:
Star
??

Cash Cow
Dog

-Based on the scores between IFAS+EFAS. -Based on the BCG Matrix.

-Generating Alternative Strategies -Applied on Multiple BU.
to the companies we are investigating.
-Easiest way to generate Alt. Str.
-Applied on a single BU.

3) Strategic Position & Action Evaluation 4) Quantitative Strategic Planning Matrix(QSPM):

(SPACE) Matrix:

No vertical Integration
as it costs money

Bad F.S /V. Good Env.

-based on 2 Dimensions (External & Internal) -based on SFAS.

 2 Internal Dimensions -Helps to choose 1 or 2 or 3 strategies w/ each other.
-Financial Position. -Competitive Position. -Can’t measure Diversification + Market penetration.
 2 External Dimensions -must be close strategies to each other
-Stability Position. (PESTEL) -Industry Position. (i.e. Market penetration + Market development)
-AS: Attractiveness Score
-Weight * AS = TAS (choose higher TAS).

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 Chapter 9
Strategy Implementation: Organizing for Action

Strategy implementation: the sum total of all activities and choices required for the execution of a strategic plan

-Who are the people to carry out the strategic plan?.

-What must be done to align company operations in the intended direction?.
-How is everyone going to work together to do what is needed?

Common Strategy Implementation Problems:

1) Took more time than planned.
2) Unanticipated major problems
3) Ineffective coordination
4) Competing activities and crises created distractions
5) Employees with insufficient capabilities (idiots)
6) Lower-level employees were inadequately trained
7) Uncontrollable external environmental factors
8) Poor departmental leadership and direction
9) Inadequately defined implementation tasks and activities
10) Inefficient information system to monitor activities

Timing Tactics Market Location Tactics:

When to Compete
deals with when a company implements a strategy
 First mover: first company to manufacture and sell
a new product or service (Higher Risk /Start)
Where to Compete
deals with where a company implements a strategy
Offensive tactic: usually takes place in an
established competitor’s market location
(u go to competitor & take his MS)

 Late movers: may be able to imitate the
technological advances of others, keep risks down by
waiting until a new technological standard or market
is established and take advantage of the first mover’s
natural inclination to ignore market segments (learn
from first Mover/ don’t repeat errors of first mover
/follow)
1) Frontal assault: Head to Head Competition
2) Flanking maneuver: finding a Gap in pdt/MKT‫واضرب‬
3) Bypass attack: Make your product obsolete
(unpredictable) ‫شد السجادة من تحتيه‬
4) Encirclement: beating your competitor at all level
(ALL Market/Pdt) ‫الحصار‬
5) Guerilla warfare: Hit & run (unexpected) ‫اهجم و اجرى‬
 Defensive tactic: usually takes place in the firm’s
own current market position as a defense against
possible attack by a rival.
-Increase expected retaliation
-Lower the inducement for attack
-Raise structural barriers
(long term agreement/high differentiated product/
low price/ low cost/loyalty program)

42 | P a g e
Synergy: exists for a divisional corporation if the return on investment is greater than what the return would be
if each division were an independent business

Forms of Synergy:
 Shared know-how
 Coordinated strategies
 Shared tangible resources
 Economies of scale or scope
 Pooled negotiating power
 New business creation

-Structure Follows Strategy: changes in corporate strategy lead to changes in organizational structure
-Organizational life cycle: describes how organizations grow, develop and decline.

Advanced Types of Organizational Structures:

-Network structure: virtual elimination of in-house business functions

-Virtual organization: composed of a series of project groups or collaborations linked by constantly
changing nonhierarchical, cobweb-like electronic networks
Reengineering: ‫هندرة‬
-the radical redesign of business processes to achieve major gains in cost, service or time.
-effective program to implement a turnaround strategy
Process of Six Sigma:
1. Define a process where results are poorer than average.
2. Measure the process to determine current performance
3. Analyze the information to pinpoint where things are going wrong
4. Improve the process and eliminate the error
5. Establish controls to prevent future defects from occurring
Designing Jobs to Implement Strategy  Job design/ job enlargement / job rotation/ Job enrichment

43 | P a g e
 Chapter 10
Strategy Implementation: Staffing and Directing

2 Important things I should know about staffing:

1) Who should fit the strategy I’ve formulated (i.e. not every CEO fit every strategy)
2) I should have succession plan (i.e. I’ve to be ready with a second plan for managerial position for any crisis)

Staffing Executive types:

If I’m growing in
the same industry For several BUs. Making Profit

Dynamic Analytical
Cautious
industry portfolio
profit planner
expert manager

Turnaround Professional
specialist liquidator

e.g. Carlos Ghosn ‫اللى هيجيب درافها‬

Selection and Management Development

Executive succession: process of replacing a key top manager
Succession planning:
-identifying candidates below the top layer of management (Assessment)
-measuring internal candidates against external candidates
-providing financial incentives
Downsizing: the planned elimination of positions or jobs
-also called “rightsizing” or “resizing”
-Can damage the learning capacity of an organization
-Creativity drops significantly and it becomes very difficult to keep high performers from leaving the company

International Issues in Staffing “Stealth expatriates”:

managers that are either cross-border commuters (especially in the EU) or the accidental expatriate who goes on
many business trips or temporary assignments due to offshoring and/or international joint ventures

Methods of Managing the Culture

of an Acquired Firm

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 Chapter 11
Evaluation & Control

Important Notes

1) Advantages & Disadvantages of Vertical Integration

Advantages
-Maintaining certain quality specifications
-Less Supplier/buyer bargaining power.
-Reduce Transportation Cost.
-Secured distribution channels.
-Improved Supply Chain Coordination.
-Blocking competitors from scarce raw
material/resources (high entry barrier as well to
new entrants).
-Gaining more experience (Know-how).
-More opportunities to supply other
manufacturers in case I integrated backwards or
other buyers in case I integrated forward
Disadvantages
-Double investment in the same industry, High
Risk.
-Mobility risk to move to other industries (locked-
up in the industry).
-Reducing manufacturing flexibility; less flexibility
in meeting different customer demands (If it
needs significant in-house development).
-Need different skills, capabilities and
competencies

2) Advantages & Disadvantages of Unrelated Diversification

Advantages Disadvantages
-New Market/industry (opportunities) -Needs good management skills to manage
-New experience. unrelated industries.
-Cash inflow to other business units in need. -Not an expert in the industry (know-how).
-Not risking all capital towards one business -High Risk.
scheme -Lack of synergy between this diversified business
unit and the rest.
-Current experienced company personnel are
experts in current industry and not in the new

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