Comprehensive Outline (Fadya)

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INTRODUCTION..............................................4 CURRENT SITUATION.........................................4 CURRENT PERFORMANCE.......................................................................................................4 STRATEGIC POSTURE.............................................................................................................4 Mission.........................................................................................................................4 COMPONENTS OF A MISSION STATEMENT:........................4 Objectives.....................................................................................................................4 Strategies......................................................................................................................4 Policies.........................................................................................................................4
Strategic Audit - ___________
EXTERNAL ENVIRONMENT: OPPORTUNITIES AND THREATS (SWOT). . . .4 SOCIETAL ENVIRONMENT (P.E.S.T FACTORS)....................4 Political - Legal Factors..............................................................................................4 Economic Factors........................................................................................................6 Socio-cultural Factors ................................................................................................6 Technological Factors.................................................................................................8 TASK ENVIRONMENT (INDUSTRY)...........................................................................................9 PORTERS APPROACH ...........................................................................................................9
Threat of New Entrants......................................................................................................................................9 Rivalry among Existing Firms............................................................................................................................9 Threat of Substitute Products or Services...........................................................................................................9 Bargaining Power of Buyers...............................................................................................................................9 Bargaining Power of Suppliers...........................................................................................................................9 Relative Power of Other Stakeholders................................................................................................................9
NEW ENTRANTS TO AN INDUSTRY TYPICALLY BRING TO IT NEW CAPACITY, A DESIRE TO GAIN MARKET SHARE, AND SUBSTANTIAL RESOURCES. THEY ARE, THEREFORE, THREATS TO AN ESTABLISHED CORPORATION. THE THREAT OF ENTRY DEPENDS ON THE PRESENCE OF ENTRY BARRIERS AND THE REACTION THAT CAN BE EXPECTED FROM EXISTING COMPETITORS. AN ENTRY BARRIER IS AN OBSTRUCTION THAT MAKES IT DIFFICULT FOR A COMPANY TO ENTER AN INDUSTRY. FOR EXAMPLE, NO NEW DOMESTIC AUTOMOBILE COMPANIES HAVE BEEN SUCCESSFULLY ESTABLISHED IN THE UNITED STATES SINCE THE 1930S BECAUSE OF THE HIGH CAPITAL REQUIREMENTS TO BUILD PRODUCTION FACILITIES AND TO DEVELOP A DEALER DISTRIBUTION NETWORK. SOME OF THE POSSIBLE BARRIERS TO ENTRY ARE:.....11
Product Differentiation. Corporations like Procter & Gamble and General Mills, which manufacture products like Tide and Cheerios, create high entry barriers through their high levels of advertising and promotion.......12 Capital Requirements. The need to invest huge financial resources in manufacturing facilities in order to produce computer microprocessors creates a significant barrier to entry to any competitor for Intel................12 Switching Costs. Once a software program like Excel or Word becomes established in an office, office managers are very reluctant to switch to a new program because of the high training costs.............................12 Access to Distribution Channels. Small entrepreneurs often have difficulty obtaining supermarket shelf space for their goods because large retailers charge for space on their shelves and give priority to the established firms who can pay for the advertising needed to generate high customer demand............................................12 Cost Disadvantages Independent of Size. Microsofts development of the first widely adopted operating system (MS-DOS) for the IBM-type personal computer gave it a significant advantage over potential competitors. Its introduction of Windows helped to cement that advantage.....................................................12 Government Policy. Governments can limit entry into an industry through licensing requirements by restricting access to raw materials, such as off-shore oil drilling sites. ............................................................12
IN MOST INDUSTRIES, CORPORATIONS ARE MUTUALLY DEPENDENT. A COMPETITIVE MOVE BY ONE FIRM CAN BE EXPECTED TO HAVE A NOTICEABLE EFFECT ON ITS COMPETITORS AND THUS MAY CAUSE RETALIATION OR COUNTEREFFORTS. FOR EXAMPLE, THE ENTRY BY MAIL ORDER COMPANIES SUCH AS DELL AND GATEWAY INTO A PC INDUSTRY PREVIOUSLY DOMINATED BY IBM, APPLE, AND COMPAQ INCREASED THE LEVEL OF COMPETITIVE ACTIVITY TO SUCH AN EXTENT THAT ANY PRICE REDUCTION OR NEW PRODUCT INTRODUCTION IS NOW QUICKLY FOLLOWED BY SIMILAR MOVES FROM OTHER PC MAKERS. ACCORDING TO PORTER, INTENSE RIVALRY IS RELATED TO THE PRESENCE OF SEVERAL FACTORS, INCLUDING:..............13
Number of competitors. When competitors are few and roughly equal in size, such as in the U.S. auto and major home appliance industries, they watch each other carefully to make sure that any move by another firm is matched by an equal countermove................................................................................................................13 Rate of industry growth. Any slowing in passenger traffic tends to set off price wars in the airline industry because the only path to growth is to take sales away from a competitor.........................................................13 Product or service characteristics. Many people choose a videotape rental store based on location, variety of selection, and pricing because they view videotapes as a commoditya product whose characteristics are the same regardless of who sells it.........................................................................................................................13 Amount of fixed costs. Because airlines must fly their planes on a schedule regardless of the number of paying passengers for any one flight, they offer cheap standby fares whenever a plane has empty seats. ...................13 Capacity. If the only way a manufacturer can increase capacity is in a large increment by building a new plant (as in the paper industry), it will run that new plant at full capacity to keep its unit costs as low as possible thus producing so much that the selling price falls throughout the industry......................................................13 Height of exit barriers. Exit barriers keep a company from leaving an industry. The brewing industry, for example, has a low percentage of companies that leave the industry because breweries are specialized assets with few uses except for making beer...............................................................................................................13 Diversity of rivals. Rivals that have very different ideas of how to compete are likely to cross paths often and unknowingly challenge each others position...................................................................................................14
SUBSTITUTE PRODUCTS ARE THOSE PRODUCTS THAT APPEAR TO BE DIFFERENT BUT CAN SATISFY THE SAME NEED AS ANOTHER PRODUCT. FOR EXAMPLE, THE FAX IS A SUBSTITUTE FOR FEDEX, NUTRASWEET IS A SUBSTITUTE FOR SUGAR, AND BOTTLED WATER IS A SUBSTITUTE FOR A COLA. ACCORDING TO PORTER, SUBSTITUTES LIMIT THE POTENTIAL RETURNS OF AN INDUSTRY BY PLACING A CEILING ON THE PRICES FIRMS IN THE INDUSTRY CAN PROFITABLY CHARGE.19 TO THE EXTENT THAT SWITCHING COSTS ARE LOW, SUBSTITUTES MAY HAVE A STRONG EFFECT ON AN INDUSTRY. TEA CAN BE CONSIDERED A SUBSTITUTE FOR COFFEE. IF THE PRICE OF COFFEE GOES UP HIGH ENOUGH, COFFEE DRINKERS WILL SLOWLY BEGIN SWITCHING TO TEA. THE PRICE OF TEA THUS PUTS A PRICE CEILING ON THE PRICE OF COFFEE. SOMETIMES A DIFFICULT TASK, THE IDENTIFICATION OF POSSIBLE SUBSTITUTE PRODUCTS OR SERVICES MEANS SEARCHING FOR PRODUCTS OR SERVICES THAT CAN PERFORM THE SAME FUNCTION, EVEN THOUGH THEY MAY NOT APPEAR TO BE EASILY SUBSTITUTABLE. .............................15 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:....................................................15
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A buyer purchases a large proportion of the sellers product or service (for example, oil filters purchased by a major automaker).............................................................................................................................................15 A buyer has the potential to integrate backward by producing the product itself (for example, a newspaper chain could make its own paper)......................................................................................................................15 Alternative suppliers are plentiful because the product is standard or undifferentiated (for example, motorists can choose among many gas stations)..............................................................................................................15 Changing suppliers costs very little (for example, office supplies are easy to find)..........................................15 The purchased product represents a high percentage of a buyers costs, thus providing an incentive to shop around for a lower price (for example, gasoline purchased for resale by convenience stores makes up half their costs)................................................................................................................................................................15 A buyer earns low profits and is thus very sensitive to costs and service differences (for example, grocery stores have very small margins)........................................................................................................................15 The purchased product is unimportant to the final quality or price of a buyers products or services and thus can be easily substituted without affecting the final product adversely (for example, electric wire bought for use in lamps)....................................................................................................................................................16
SUPPLIERS CAN AFFECT AN INDUSTRY THROUGH THEIR ABILITY TO RAISE PRICES OR REDUCE THE QUALITY OF PURCHASED GOODS AND SERVICES. A SUPPLIER OR SUPPLIER GROUP IS POWERFUL IF SOME OF THE FOLLOWING FACTORS APPLY:..........................16
The supplier industry is dominated by a few companies, but it sells to many (for example, the petroleum industry)...........................................................................................................................................................16 Its product or service is unique and/or it has built up switching costs (for example, word processing software). .........................................................................................................................................................................16 Substitutes are not readily available (for example, electricity).........................................................................16 Suppliers are able to integrate forward and compete directly with their present customers (for example, a microprocessor producer like Intel can make PCs)...........................................................................................16 A purchasing industry buys only a small portion of the supplier groups goods and services and is thus unimportant to the supplier (for example, sales of lawn mower tires are less important to the tire industry than are sales of auto tires).......................................................................................................................................16
INTERNAL ENVIRONMENT: STRENGTH AND WEAKNESSES (SWOT).....19 Corporate Structure---- Changes in Strategies = changes in structure (Restructuring as a way to improve performance).............................................................................19 SIMPLE STRUCTURE:............................................................................................................22 ADVANTAGES: ..................................................................................................................23 LEADERSHIP STYLE +HR PAPER..........................................................................................23 ACCORDING TO BEHAVIOURAL APPROACH, THERE ARE FOUR STYLES:...........................................23 CORPORATE CULTURE ........................................................................................................24 CORPORATE RESOURCES......................................................................................................26 Marketing (STP and 4Ps)...........................................................................................26 Finance......................................................................................................................38
Profitability Ratios...........................................................................................................................................39 Return On Assets..............................................................................................................................................40 Return on Equity..............................................................................................................................................40 Debt Ratios.......................................................................................................................................................41 The Debt Ratio.................................................................................................................................................41 Debt-Equity Ratio............................................................................................................................................41 Interest Coverage Ratio....................................................................................................................................41 Price/Earnings Ratio.........................................................................................................................................42
Human Resources (Restructuring as a way to improve performance)......................43 Human Resource Objectives......................................................................................43 Human Resource Policies and Programs (Key Strategic HRM Concepts That Must Be Applied).................................................................................................................44 Human Resource Management (HRM) Activities:.....................................................45 Four descriptions of the HRM function:....................................................................46 ANALYSIS OF STRATEGIC FACTORS (SWOT).....................50 3
RECOMMENDED STRATEGY .................................................................................................74 Introduction Current Situation Current Performance Strategic Posture Mission
Vision (What do we want to become?)& Mission ( What is our business?) Components of a Mission Statement: a. Customers: Who are the firms customers? b. Products or Services: What are the firms major products or services? c. Markets: Geographically, where does the firm compete? d. Concern for Survival, Growth, & Profitability: Is the firm committed to growth and financial soundness? e. Philosophy: What are the basic beliefs, values, aspirations, & ethical priorities of the firm? f. Self-Concept: What is the firms distinctive competence or major competitive advantage? g. Concern for Public Image: Is the firm responsive to social, community & environmental concerns? h. Concern for employees: Are employees a valuable asset of the firm? Objectives Strategies Policies External Environment: Opportunities and Threats (SWOT) Societal Environment (P.E.S.T Factors) Political - Legal Factors Government regulations & deregulations. Changes in tax laws.
Changes in patents( )laws Level of government subsidies Country to other countries relationships Import-export regulations Political conditions in foreign countries Size of government budgets Antitrust regulations Environmental protection laws Tax laws Special incentives Foreign trade regulations Attitudes toward foreign companies Laws on hiring and promotion Stability of government ecological/environmental issues current legislation home market future legislation European/international legislation regulatory bodies and processes government policies government term and change trading policies funding, grants and initiatives home market lobbying/pressure groups international pressure groups wars and conflict political stability, facilities for the entrance for new foreign investment, taxation law, deregulation trend
Economic Factors Availability of credit Level of disposable income Interest rates Inflation rates
Stock Market trend Foreign countries economic conditions Monetary policies
The GDP (which directly reflects on consumer spending power) Money supply Unemployment levels Wage/price controls Devaluation/revaluation Energy availability and cost home economy situation /trends overseas economies and trends general taxation issues /specific to product or service seasonality/weather issues market and trade cycles specific industry factors market routes and distribution trends customer/end-user drivers international trade/monetary issues investment laws and regulations, The currency depreciation or appreciation price elasticity of demand Socio-cultural Factors Cultural fear or freedom level Cultural symbol (status)
Demographics (age, size,)- continuous growth in the world population Whats socially acceptable? Number of marriages, divorces, births, and deaths. Social security programs Per capita Income Traffic congestion Trust in government
Average level of education Population changes by race, age, and sex Air pollution Lifestyle changes Career expectations Consumer activism Rate of family formation Growth rate of population Age distribution of population Regional shifts in population Life expectancies Birth rates lifestyle trends demographics consumer attitudes and opinions media views law changes affecting social factors brand, company, technology image consumer buying patterns fashion and role models major events and influences buying access and trends ethnic/religious factors
advertising and publicity ethical issues
Technological Factors The Internet; (rapid growth in the internet infrastructure) - The pace of technological change. - The rate of development - The presence of skilled persons - Presence of technological capabilities. Internet availability and usage E-commerce The rate of development The presence of skilled persons Presence of technological capabilities. Substitute might replace the organizations product. Total government spending for R&D Total industry spending for R&D Focus of technological efforts Patent protection New products New developments in technology transfer from lab to marketplace Productivity improvements through automation competing technology development research funding associated/dependent technologies replacement technology/solutions maturity of technology manufacturing maturity and capacity
information and communications consumer buying mechanisms/technology technology legislation innovation potential technology access, licensing, patents intellectual property issues
global communications
Task Environment (Industry) Porters Approach Michael Porter contends that a corporation is most concerned with the intensity of competition within its industry. The level of this intensity is determined by basic competitive forces. The collective strength of these forces, he contends, determines the ultimate profit potential in the industry, where profit potential is measured in terms of long-run return on invested capital. In carefully scanning its industry, the corporation must assess the importance to its success of each of the 6 forces: threat of new entrants, rivalry among existing firms, threat of substitute products or services, bargaining power of buyers, bargaining power of suppliers, and relative power of other stakeholders. Threat of New Entrants Rivalry among Existing Firms Threat of Substitute Products or Services Bargaining Power of Buyers Bargaining Power of Suppliers Relative Power of Other Stakeholders
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Rivalry among existing firms? Criteria Number of firms, few equally balanced giants Industry growth rate Very high or fixed storage cost Commoditization, low differentiation Capacity, intermittent overcapacity Diversity of rivalry High strategic/corporate stakes
High exit barriers The bargaining power of buyers, how strong? Criteria A single or very few buyers purchase a high proportion of total sale Product volume purchased Products are standard or undifferentiated Low switching costs Buyer is in low profit business = sensitive to cost Real threat of backward integration from buyer Industry product not important for buyer quality The buyer has full information on product The bargaining power of suppliers, how strong? Criteria Dominated by few companies, more concentrated than the target industry The target industry is NOT important to the supplier Supplier product is unique, or high switching cost Supplier product is critical for the business of the target Substitutes are not easily available Real threat of forward integration from supplier Threat of new entrants barriers to entry how high Criteria Powerful economies of scale Strong customer loyalty by product 10
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differentiation Large capital investment requirements Switching cost for new products are high Lack of access to distribution channels Structural cost disadvantage Government policy Substitutes: Criteria Relative perceived value tending to improve
Where the threat is to another industry's cash cow Threats of new entrants Barriers to entry: New entrants to an industry typically bring to it new capacity, a desire to gain market share, and substantial resources. They are, therefore, threats to an established corporation. The threat of entry depends on the presence of entry barriers and the reaction that can be expected from existing competitors. An entry barrier is an obstruction that makes it difficult for a company to enter an industry. For example, no new domestic automobile companies have been successfully established in the United States since the 1930s because of the high capital requirements to build production facilities and to develop a dealer distribution network. Some of the possible barriers to :entry are The need to gain economic of scale quickly The need to gain technology and specialized know-how The lack of experience Strong customer loyalty Strong brand preference Large capital requirements Lack of adequate distribution channels The potential saturation of market. Government regulatory Capital intensity
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Economies of scale-- Scale economies in the production and sale of mainframe computers, for example, gave IBM a significant cost advantage over any new rival Learning curve effects Extent of vertical integration Level of product differentiation Ease of access to distribution channels
Amount of switching costs Product Differentiation. Corporations like Procter & Gamble and General Mills, which manufacture products like Tide and Cheerios, create high entry barriers through their high levels of advertising and promotion. Capital Requirements. The need to invest huge financial resources in manufacturing facilities in order to produce computer microprocessors creates a significant barrier to entry to any competitor for Intel. Switching Costs. Once a software program like Excel or Word becomes established in an office, office managers are very reluctant to switch to a new program because of the high training costs. Access to Distribution Channels. Small entrepreneurs often have difficulty obtaining supermarket shelf space for their goods because large retailers charge for space on their shelves and give priority to the established firms who can pay for the advertising needed to generate high customer demand. Cost Disadvantages Independent of Size. Microsofts development of the first widely adopted operating system (MS-DOS) for the IBM-type personal computer gave it a significant advantage over potential competitors. Its introduction of Windows helped to cement that advantage. Government Policy. Governments can limit entry into an industry through licensing requirements by restricting access to raw materials, such as off-shore oil drilling sites. Potential Entry of New Competitors
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Barriers to entry are important Quality, pricing, and marketing can overcome barriers 2Rivalry among existing firms In most industries, corporations are mutually dependent. A competitive move by one firm can be expected to have a noticeable effect on its competitors and thus may cause retaliation or counterefforts. For example, the entry by mail order companies such as Dell and Gateway into a PC industry previously dominated by IBM, Apple, and Compaq increased the level of competitive activity to such an extent that any price reduction or new product introduction is now quickly followed by similar moves from other PC makers. According to Porter, intense rivalry is related to the presence of several :factors, including Number of competitors. When competitors are few and roughly equal in size, such as in the U.S. auto and major home appliance industries, they watch each other carefully to make sure that any move by another firm is matched by an equal countermove. Rate of industry growth. Any slowing in passenger traffic tends to set off price wars in the airline industry because the only path to growth is to take sales away from a competitor. Product or service characteristics. Many people choose a videotape rental store based on location, variety of selection, and pricing because they view videotapes as a commoditya product whose characteristics are the same regardless of who sells it. Amount of fixed costs. Because airlines must fly their planes on a schedule regardless of the number of paying passengers for any one flight, they offer cheap standby fares whenever a plane has empty seats. Capacity. If the only way a manufacturer can increase capacity is in a large increment by building a new plant (as in the paper industry), it will run that new plant at full capacity to keep its unit costs as low as possiblethus producing so much that the selling price falls throughout the industry. Height of exit barriers. Exit barriers keep a company from
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leaving an industry. The brewing industry, for example, has a low percentage of companies that leave the industry because breweries are specialized assets with few uses except for making beer. Diversity of rivals. Rivals that have very different ideas of how to compete are likely to cross paths often and unknowingly challenge each others position. Number of competitors Relative size of competitors Industry profitability Stage in industry lifecycle Possible gain from successful move Capacity Intensity Switching Costs Level of product differentiation Rivalry Among Competing Firms Most powerful of the five forces Focus on competitive advantage of strategies
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Threats of substitutes Availability of substitute products Relative price of substitute products declines Consumers switching cost decreases Amount of switching costs Relative prices of substitutes
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Substitute products are those products that appear to be different but can satisfy the same need as another product. For example, the fax is a substitute for FedEx, Nutrasweet is a substitute for sugar, and bottled water is a substitute for a cola. According to Porter, Substitutes limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably charge.19 To the extent that switching costs are low, substitutes may have a strong effect on an industry. Tea can be considered a substitute for coffee. If the price of coffee goes up high enough, coffee drinkers will slowly begin switching to tea. The price of tea thus puts a price ceiling on the price of coffee. Sometimes a difficult task, the identification of possible substitute products or services means searching for products or services that can perform the same function, .even though they may not appear to be easily substitutable Potential Development of Substitute Products Pressures increase when consumers switching costs decrease Firms plans for increased capacity & market penetration Bargaining power of Buyers 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 A buyer purchases a large proportion of the sellers product or service (for example, oil filters purchased by a major automaker). A buyer has the potential to integrate backward by producing the product itself (for example, a newspaper chain could make its own paper). Alternative suppliers are plentiful because the product is standard or undifferentiated (for example, motorists can choose among many gas stations). Changing suppliers costs very little (for example, office supplies are easy to find). The purchased product represents a high percentage of a buyers costs, thus providing an incentive to shop around for a lower price (for example, gasoline purchased for resale by convenience stores makes up half their costs). A buyer earns low profits and is thus very sensitive to costs and service differences (for example, grocery stores have very small margins). 15
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The purchased product is unimportant to the final quality or price of a buyers products or services and thus can be easily substituted without affecting the final product adversely (for example, electric wire bought for use in lamps). When customers are: concentrated large buy in volume
Bargaining Power of Buyers Customers concentrated or buy in volume affects intensity of competition Consumer power is higher where products are standard or undifferentiated Relative size of buyers Number of buyers Importance of buyers as major customers Threat of backward integration Amount of switching costs Uniqueness of product Level of buyer profitability Bargaining power of suppliers Suppliers can affect an industry through their ability to raise prices or reduce the quality of purchased goods and services. A supplier or supplier group is powerful if :some of the following factors apply The supplier industry is dominated by a few companies, but it sells to many (for example, the petroleum industry). Its product or service is unique and/or it has built up switching costs (for example, word processing software). Substitutes are not readily available (for example, electricity). Suppliers are able to integrate forward and compete directly with their present customers (for example, a microprocessor producer like Intel can make PCs). A purchasing industry buys only a small portion of the
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supplier groups goods and services and is thus unimportant to the supplier (for example, sales of lawn mower tires are less important to the tire industry than are sales of auto tires). When suppliers are: Few suppliers who supply the required products The products have few substitutes The switching cost is relatively high
Bargaining Power of Suppliers Large number of suppliers & few substitutes affects intensity of competition Backward integration can gain control or ownership of suppliers Relative size of suppliers Number of suppliers Importance of suppliers as major sources Threat of forward integration Amount of switching costs Importance of products to buyer Level of supplier profitability
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18 INTERNAL STRENGTHS 1. Cash position 2. Luxury car image STRATEGIES TACTICS ACTIONS 3. New car models 4. Location dose to suppliers 5. Engineering and technology 3. 4. INTERNAL WEAKNESSES 1. 2. High costs Venturing into unrelated businesses Organizational diversity Reliance on past successes and bureaucracy Long cycle for new model development Relatively weak position in Japan
5. 6. EXTERNAL OPPORTUNITIES 1. Demand for luxury cars 2. Eastern Europe, especially East Germany 3. Prosperity through EC 1992 4. Electronics technology S-0 STRATEGY 1. Develop new models (using high-tech) and charge premium prices 2. Use financial resources to acquire other companies or increased production capacity
W-0 STRATEGY 1. Reduce costs through automation and flexible manufacturing Manufacture parts in Eastern Europe Reorganizations Daimler-Benz management holding companies
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EXTERNAL THREATS 5. Decrease in defense needs because of easing of EastWest tensions 6. BMW, Volvo, Jaguar, Lexus, Infinity in Europe 7. BMW in Japan 8. Diesel emissions 9. Renault/Volvo cooperation 10. Political instability in South Africa
S-T STRATEGY 1. Transform defense sector to consumer sector 2. Develop new models to compete especially in Europe
W-T STRATEGY 1. 2. Retrench in South Africa Form strategic alliance with Mitsubishi to penetrate the Japanese market
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Internal Environment: Strength and Weaknesses (SWOT) Corporate Structure---- Changes in Strategies = changes in structure (Restructuring as a way to improve performance)
1. Changes in strategy often require changes in the way an organization is structured for two major reasons:
a.
First, structure largely dictates how objectives and policies will be established. For example, objectives and policies established under a geographic organizational structure are couched in geographic terms. Objectives and policies are stated largely in terms of products in an organization whose structure is based on product groups. The structural formula for developing objectives and policies can significantly impact all other strategyimplementation issues. Second major reason why changes in strategy often require changes in structure is that structure dictates how resources will be allocated.
b.
2. Changes in strategy lead to changes in organizational structure. Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, follow strategy. The below illustrates a structure sequence repeated as organizations grow and change over time. 3. There is not just one optimal organizational design or structure for a given strategy or type of organization.
The Functional Structure

1. The most widely used structure is the functional or centralized type because this structure is the simplest and least expensive of the seven alternatives. 2. A functional structure group's tasks and activities by business function such as product/operations, marketing, finance/accounting, R&D, and computer information systems. a. Advantages: Besides being simple and inexpensive, a functional structure also promotes specialization of labor, encourages efficiency,
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20 minimizes the need for an elaborate control system, and allows rapid decision-making. b. Disadvantages: Some disadvantages of a functional structure are that it forces accountability to the top, minimizes career development opportunities, and is sometimes characterized by low employee morale.
The Divisional Structure 1. The divisional or decentralized structure is the second most common type used by American businesses. 2. The divisional structure can be organized in one of four ways: by geographic area, product or service, customer, or process. With a divisional structure, functional activities are performed both centrally and in each separate division. a. Advantages: A divisional structure has some clear advantages. First, and perhaps foremost, is accountability. Other advantages of the divisional structure are that it creates career development opportunities for managers, allows local control of local situations, leads to a competitive climate within an organization, and allows new businesses and products to be added easily. b. Disadvantages: Perhaps the most important limitation is that a divisional structure is costly. 3. A divisional structure by geographic area is appropriate for organizations whose strategies need to be tailored to fit the particular needs and characteristics of customers in different geographic regions. 4. A division structure by product is most effective for implementing strategies when specific products or services need special emphasis. 5. A division structure by process is similar to a functional structure, because activities are organized according to the way work is actually performed.
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21 The Strategic Business Unit (SBU) Structure 1. The SBU structure group's similar divisions into strategic business units and delegate authority and responsibility for each unit to a senior executive who reports directly to the CEO. a. Advantages: This change in structure can facilitate strategy implementation by improving coordination between similar divisions and channeling accountability to distinct business units. Disadvantages: Two disadvantages of an SBU structure are that it requires an additional layer of management, which increases salary expenses, and the role of the group vice president is often ambiguous.
b.
The Matrix Structure 1. It is the most complex of all designs because it depends upon both vertical and horizontal flows of authority and communication. a. b. c. It can result in higher overhead because it creates more managerial positions. It also creates dual lines of budget authority, dual sources of reward and punishment, shared authority, and dual reporting channels. Advantages are that project objectives are clear, there are many channels of communication, workers can see visible results of work, and projects can be shut down easily.
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22 Restructuring, Reengineering Reshaping Corporate Landscape
1. Restructuring, also called downsizing, rightsizing, or delayering, involves

reducing the size of the firm in terms of number of employees, divisions or units, and hierarchical levels in the firms organizational structure. 2. 3. The Internet is ushering in a new wave of business transformations. Reengineering is concerned more with employee and customer well-being than with shareholder well-being.
Restructuring
1. Firms often employ restructuring when various ratios appear out of line with
competitors, as determined through benchmarking exercises.
a. The primary benefit sought from restructuring is cost reduction. The downside of
restructuring can be reduced employee commitment, creativity, and innovation that accompanies the uncertainty and trauma associated with pending and actual employee layoffs. Reengineering 1. In reengineering, a firm uses information technology to break down functional barriers and create a work system based on business processes, products, or outputs rather than on functions or inputs. A benefit of reengineering is that it offers employees the opportunity to see more clearly how their particular jobs impact the final product or service being marketed by the firm. Reengineering, also called process management, process innovation, or process redesign, involves reconfiguring or redesigning work, jobs, and processes for the purpose of improving cost, quality, service, and speed.
2.
3.
The organization is the process of arranging people and other resources to work together to accomplish a goal and as a result of the company strategy the organization structure must be adjusted to cope with the new strategy and achieve its goals. The organization's strategy to grow and go more international must be reflected on the organization structure to achieve the required result. Simple structure: Owner-manager makes decisions. Little specialization of tasks. Few rules, little formalization.
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Advantages: Provides high flexibility Rapid product introduction Few coordination problems
Leadership Style +HR Paper According to behavioural approach, there are four styles: 1. Laissez-faire shows low concern for both people and task. Turn most decisions over the work group and show less interest in the work process or its results. 2. Directive or Autocratic, High concern for task and low concern for people. Make most of the decisions, gives directions and expect his orders to be followed. 3. Supportive or human relations leader shows high concern for people and low concern for tasks. Warm in interpersonal relationships, avoid conflict, and seek harmony in decision-making. 4. Participative or democratic, shows high concern for both people and task. Share decisions with the work group, encourage participation and support the work efforts of others. According to situational Approach: o Delegating, allowing the group to make and take responsibilty for task decisions(low task low relationship style). o Participating,emphasizing shared ideas and participation decsions on task directions (low task high relationship style) o Selling,explaining task directions in supportive and persuasive way(high task high relationship style) o Telling,giving specific task directions and closely supervising work ( high task low relationship style) o Charismatic Leader , develops special leader follower relationships and inspire followers in extraordinary way o Transformational leader,inspirational leader that gets people to do more in achievinh high performance o Transactional leader, directs the feeorts of others through task rewards and structure.
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Corporate Culture Creating a Strategy Supportive Culture Culture aspects of strategy: When proposed a new strategy you must understand and identify the aspects of the existing culture which will antagonist the new strategy & then change them.As the main challenge in implementing is to bring change in org. culture & individual mindsets to support new strategy. New strategy is market driven therefore changing culture to fit new strategy is more effective than vice versa. Techniques: 1- Training 3- Promotion 5- Role Modeling Reinforcement 2- Transfer 4- Restructuring 5- Positive
- Culture can represent a major strength or weakness to the business function (org.). i.e.) No two org. have the same culture, it represent the org. character. - Corporate culture is the collection of beliefs, expectations, and values learned and shared by a corporations members and transmitted from one generation of employees to another. - The corporate culture generally reflects the values of the founder(s) and the mission of the firm. It gives a company sense of identity. -It is the collection of beliefs, expectations and values learned, shared by a corporation's members, and transferred from one generation of employees to another. It might be changing or elaborating but hardly completely fades away. It gives the corporation its identity. -The best organization have strong culture that show respect for members Resistance to Change 1. Resistance to change can be considered the single greatest threat to successful strategy implementation.
A.
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It may take on such forms as sabotaging production machines, absenteeism, filing unfounded grievances, and unwillingness to cooperate. Resistance to change can emerge at any stage or level of the strategy-implementation process. There are three implementing change: commonly used strategies for
3. 4.
a) Force change strategy b) Educative change strategy
c) Self-interest change strategy 5. It represents major threat to strategy implementation, it could be in the form of sabotaging machines, absenteeism, filing unfounded grievances, and unwillingness to cooperate effectively Thus, successful strategy implementation must provide accurate information to employees and hinges around developing a climate conductive to change. Raises anxiety; fear concerning a) Economic loss b) Inconvenience c) Uncertainty d) Break in status-quo Egyptian Culture needs: - Culture of completion - Focus on quality - Encourage ethical practice - Personal accountability 3 Main forces help to sustain the organization culture: 1- Selection method 2- The action of top management 3- Socilaization
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7.
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Corporate Resources
Ex. 2.5
Levels
Marketing (STP and 4Ps) Market segmentation, Targeting and Positioning
Culture that can be seen at the surface level
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Marketing segmentation (Level of market segmentation)
Determining distinct groups of buyers (segments) with different needs, characteristics, or behavior. Mass Marketing
o Same product to all consumers with Homogeneous preferences; Implements mass production concept
o Very large segment
Niche Marketing
o Narrowly defined customer group seeking a distinctive mix of benefits & willing to pay premium. o Specialization; very small market segment o Niche is relatively small market which doesnt attract many other competitors; at the same time it has huge return (profit).
Local Marketing
o Marketing activities/programs tailored to the needs and wants of local customer groups o Grassroots (Cultural) Marketing
Individual Marketing
o Empowers consumers to design the product and service offering of their choice. o Micromarketing 27
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o One-to-One Marketing o Customerization Segmenting consumer markets

Geographic: World region, country, city, density,
climate
Demographic: age, gender, family size, income, occupation ,education, religion, race,
generation, nationality Psychographic: social class, lifestyle, personality Behavioral: occasions, benefits, user rate, loyalty, attitude toward product. Market segment attractivness:
(B)
Market Targeting
Evaluating each segments attractiveness and selecting one or more segments to enter. o Mass (undifferentiated) marketing
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o The same offer with the a advantage of economic of scale o Segment (differentiated) marketing o Several segment with offer for each o Concentrated (niche) marketing o Target Singles with a single marketing mix o Local marketing o Tailoring products for the local customer group needs o Customization o Tailoring products for the small group of people or specific individuals needs.
Undifferentiated marketing (mass) Differential marketing Concentrated Marketing Micromarketing (C) Positioning
Criteria of Positioning: 1. Feature / Benefits:

features or characteristics that is already included in
the product benefit for customers User Category:

How to position you based on users who use this product ex:
Against Competitors:
Ex:
Hybrid:
Mixture between more than one criteria and it is the most
preferred. Ex: fine tissues smooth for women (Feature + User) Ex: Volvo dropped when Mercedes and BMW came out with things beyond safety.
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Positioning by Packaging:
Packaging creates a distinct identity and brand image.
Many companies view the package as an important way to communicate and create an impression of their brand in the mind of consumers. Ex: Glittery Perfume package Repositioning: Sometimes marketers want to reposition the product in marketplace due to some reasons like; change in customer needs, showing the product in higher quality or the current position become very competitive.
Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. i.e. Chevy Blazer is like a rock. Begin by differentiating the companys marketing offer that will deliver more value than the competitors thus gaining competitive advantage 1.Choose a broad positioning for the product This framework is based on the notion that in every market there are three types of customers: 1. Some customers favor the firm that is advancing the technological frontier (product leadership). 2. Another customer group does not need the latest products but wants highly reliable and dependable performance (operational excellence). 3. A final customer group prefers the firm that is most responsive and flexible in meeting their individual needs (customer intimacy). 2.Choose a specific positioning for the product Companies need to go beyond a broad positioning to express a more concrete benefit and reason to buy. Many companies advertise a single major benefit positioning, drawing from such possibilities as: Volvos case is interesting in that Volvo recognized that in every country of the world, some car buyers make safety their highest priority. In discovering this global niche, Volvo is able to sell its cars all over the world. Volvo has added a second benefit positioning of their automobile, namely the claim that it is one of the most durable cars. They use that second positioning in countries like Mexico,
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where the buyer is concerned lasting car than with safety. Best quality Best performance Most reliable Most durable Safest Fastest
more
with
buying
ling-
Best value for the money Least expensive Most prestigious Best designed or styled Easiest to use Most convenient
3.Choose a value positioning for the product More for More Companies can always be found that specialize in making the most upscale version of the product and charging a high price to cover their higher costs. Called luxury goods, such products claim to be better in quality, craftsmanship, durability, performance, or style. Yet more-for-more brands are vulnerable: They often invite imitators who claim the same quality but are priced lower. And luxury goods are at risk during economic downturns when buyers become more cautious in their spending. More for the Same Companies have been able to attack a more for more brand by introducing a brand claiming comparable quality and performance but priced much lower . The Toyota company introduced its new Lexus automobile with more for the same value positioning. The Same for Less It seems that everyone is happy when they can buy a typical product or brand at less than the normal price. Everything Arrow shirts, Goodyear tires, Panasonic TV setsseems to be available at a lower price at some store or discount shop.
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Discount stores dont claim to have superior products, but they can offer ordinary brands at deep savings, based on superior purchasing power. Less for Much Less Some people complain that some manufacturers or service providers provide more than they require but they still have to pay the higher price. One cannot say to a hotel, take out the TV set and charge me less, or tell an airline, skip the food and charge me less.
Therefore sellers have an opportunity to enter a market with a less for much less offering. There is a hotel in Tokyo that rents not a room but a berth for substantially less than the normal hotel price. Southwest Airlines, the most profitable U.S. air carrier, charges much less by not serving food, not assigning seats, not using travel agents, and not transferring luggage to other carriers. More for Less Of course, the winning value positioning would be to offer prospects and customers more for less. This is the attraction of highly successful category killer stores. Sportmart offers the largest selection of sports equipment and sports clothing for the lowest prices. Mass merchandisers make a similar claim: walking into a Wal-Mart store, one meets a friendly greeter, sees a whole array of attractively laid-out, well-known branded goods, finds everyday low prices, and generous return policies, and leaves thinking of Wal-Mart as a place where he or she can get more for less. 4.Develop the total value proposition for the product In searching for a specific positioning, the business unit should consider the following possible sources:
Attribute positioning: The Company positions itself on some attribute or feature. A hotel describes itself as the citys tallest hotel. Positioning by feature is normally a weak choice since no benefit is explicitly claimed. Benefit positioning: The product promises a benefit. Tide claims that it cleans better. Use/application positioning: The product is positioned as the best in a certain application. Nike might describe 32
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one of its shoes as the best to wear for racing and another as the best to wear for playing basketball. User positioning: The product is positioned in terms of a target user group, Apple Computer describes its computers and software as the best for graphic designers. Competitor positioning: The product suggests its superiority or difference from a competitors product. Avis described itself as a company that tries harder (than Hertz, by implication); 7 UP called itself the Uncola, Category positioning: The Company may describe itself as the category leader, Xerox means copy machines. Quality/price positioning: The product is positioned at a certain quality and price level. Taco Bell represents its tacos as giving the most value for the money. Companies must avoid positioning their brand: the following a errors in
Under-posirioning: Failing to present benefit or reason to buy this brand
strong
central
Over-posirioning: Adopting such a narrow positioning that some potential customers may overlook the brand Confused positioning: Claiming two or more benefits that contradict each other. Irrelevant positioning: Claiming prospects care about a benefit which few
Doubtful positioning: Claiming a benefit that people will doubt the brand or company can actually deliver
4Ps
Product and Service Strategies
Pricing Policies and Strategies
The Promotional Plan
The Distribution Plan
Product & Service Strategy: Methods used to improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g 33
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Extension strategies Specialized versions New editions Improvements real or otherwise! Changed packaging Technology, etc. Product modification Strategies
1. Line extension: additional items in the same product under the same brand Advantage: Saving cost Minimize risk in introducing new products Disadvantage: Brand dilution consumer confusion Cannibalization on original product product under the
2. brand extension: launching new same brand
Advantage: Saving high advertising cost and build brand name Give new products instant recognition and faster acceptance Disadvantage: consumer confusion about the brand image and may loose its positioning may harm consumer attitude toward other product under the same brand
3. multi branding: new brand name in the same product Advantage: establish different features appeal to different buying motives Disadvantage: multi branding might gain only small market share need resources on building different brands 34
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Price: Pricing Strategies Penetration pricing: Where the organisation sets a low price to increase sales and market share. used when: market is highly price sensitive low price stimulate market growth production and distribution cost fall with in accumulated production experience
Skimming pricing: The organisation sets an initial high price and then slowly lowers the price to make the product available to a wider market. The objective is to skim profits of the market layer by layer. Used when: sufficient number of buyers have a high current demand high price product communicates the image of superior
Competition pricing: Setting a price in comparison with competitors. Product Line Pricing: Pricing different products within the same product range at different price points. An example would be a video manufacturer offering different video recorders with different features at different prices. The greater the features and the benefit obtained the greater the consumer will pay. This form of price discrimination assists the company in maximising turnover and profits. Bundle Pricing: The organisation bundles a group of products at a reduced price. Psychological pricing: The seller here will consider the psychology of price and the positioning of price within the market place. The seller will therefore charge 99p instead 1 or $199 instead of $200 Premium pricing: The price set is high to reflect the exclusiveness of the product. An example of products using this strategy would be Harrods, first class airline services, porsche etc.
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Optional pricing: The organisation sells optional extras along with the product to maximise its turnover. This strategy is used commonly within the car industry.
Promotion: Promotional Strategy:

Push Strategy: promotion to intermediaries in the
distribution channel to move or push products. For example; bonus to retailers to spread good word of mouth and recommend your product to the consumers. Pull Strategy: promotion is designed to stimulate consumers demand, usually though branding. For example; free tooth brush with toothpaste. Strategy Mix: is a combination of both, ideal strategy Profile Strategy: used by companies on 2 occasions; 1. Crisis or rumors 2. New company
Promotion strategies Advertising Used when: Build up long term image Cost efficient in reaching geographically dispersed buyers Trigger quick sales Gives image of good value to the brand
Sales promotion Used when: Encourage trial or purchase Short run effect Boosting sagging sales Public relation Used when:
Building up good corporate image
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Heading off unfavorable rumors Personal selling Used when: Making sales Building customer relations conviction and solicit action Build up buyers preference,
Direct and interative marketing Used when: Targeted individual consumers Localized and customized used to reach well defined target segments Distribution & Place: Up-market: prestigious areas o Down-market: poor or non-prestigious area. Ex: displaying products that match people o Some products go upper market only & this is unethical but legal; ex: MacDonalds does not open any branches in local areas. Distribution strategies Identify major alternatives channels Number of intermediary: Exclusive distribution selective distribution
intensive distribution Evaluting alternatives channels Based on: Channels cost Sales output Product complexity
Selecting channels Based on: Years on business 37
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Growth record Financial strength Service reputation
Finance The interpretation of the ratios: Liquidity ratios The ratio indicates that the company is able to meet all its current and immediate obligations to the creditors, as it has the capability to generate cash in a short period through liquidating the current assets. It attempts to measure a company's ability to pay off its short-term debt obligations. 1. The concept behind this ratio is to ascertain whether a company's short-term assets (cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes/Accounts payable, current portion of term debt, payables, accrued expenses and taxes, tax debt, Current maturities of long-term debts, Short-term loans, Other accrued expenses). o In this ratio we r going to test or examine how much the C.A can cover the C.L, So if the
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o o
ratio is 1 this will be good to the company & vise versa. This ratio plays as indicator to the suppliers because it reflects how quick the company can settle its payables. The bankers are looking to this ratio because it reflects how much the company is prompt to the suppliers & its short term obligations.
In theory, the higher the current ratio, the better.
1.
= Current Assets Inventories/Current liabilities This ratio is more effective because it reflects how quick the company can convert its C.A into cash without selling any of its inventories. The quick ratio is more conservative than the current ratio because it excludes inventory and other current assets, which are more difficult to turn into cash. Therefore, a higher ratio means a more liquid current position.
3. The cash ratio is the most stringent and conservative, it only looks at the most liquid short-term assets of the company, which are those that can be most easily used to pay off current obligations. It also ignores inventory and receivables, as there are no assurances that these two accounts can be converted to cash in a timely matter to meet current liabilities. Very few companies will have enough cash and cash equivalents to fully cover current liabilities, which isn't necessarily a bad thing, so don't focus on this ratio being above 1:1. Profitability Ratios These ratios, give users a good understanding of how well the company utilized its resources in generating profit and shareholder value. The long-term profitability of a company is vital for both the survivability of the company as well as the benefit received by shareholders.
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Positive profit margin analysis translates into positive investment quality. To a large degree, it is the quality, and growth, of a company's earnings that drive its stock price. Return On Assets This ratio indicates how profitable a company is relative to its total assets. The need for investment in current and non-current assets varies greatly among companies. Capitalintensive businesses (with a large investment in fixed assets) are going to be more asset heavy than technology or service businesses. As a rule of thumb, investment professionals like to see a company's ROA come in at no less than 5%.The higher the better. o The ratio should go high. If the ratio goes lower, this means that the firm is utilizing its assets in a proper way. Also means that the firm is paying more interest expenses which decrease the net income. Return on Equity This ratio indicates how profitable a company is by comparing its net income to its average shareholders' equity. The return on equity ratio (ROE) measures how much the shareholders earned for their investment in the company. The higher the ratio percentage, the more efficient management is in utilizing its equity base and the better return is to investors. In general, financial analysts consider return on equity ratios in the 15-20% range as representing attractive levels of investment quality. o The ratio should go high. If the ratio goes lower, this means that the firm is using more debt to finance its operations. This means that paying more interest expenses which decrease the net income. o If the result is relatively low, we recommend that the firm should change its financial strategy to be more dependants on equity rather than debt. 40
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o Also it should change its marketing strategy to increase its sales in less operations cost to increase its net income. Debt Ratios These ratios give users a general idea of the company's overall debt load as well as its mix of equity and debt. Debt ratios can be used to determine the overall level of financial risk a company and its shareholders face. In general, the greater the amount of debt held by a company the greater the financial risk of bankruptcy. The Debt Ratio The debt ratio compares a company's total debt to its total assets, which is used to gain a general idea as to the amount of leverage being used by a company. In general, the higher the ratio, the more risk that company is considered to have taken on. o Creditors prefer low debt ratios because the lower the ratio, the greater the cushion against creditors' losses in the event of liquidation. o Stockholders, on the other hand, may want more leverage because it magnifies expected earnings. Debt-Equity Ratio The debt-equity ratio is another leverage ratio that compares a company's total liabilities to its total shareholders' equity. This is a measurement of how much suppliers, lenders, creditors and obligors have committed to the company versus what the shareholders have committed.
Interest Coverage Ratio The interest coverage ratio is used to determine how easily a company can pay interest expenses on outstanding debt.
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Price/Earnings Ratio The price/earnings ratio (P/E) is the best known of the investment valuation indicators. The P/E ratio has its imperfections, but it is nevertheless the most widely reported and used valuation by investment professionals and the investing public. The financial reporting of both companies and investment research services use a basic earnings per share (EPS) figure divided into the current stock price to calculate the P/E multiple (i.e. how many times a stock is trading (its price) per each dollar of EPS).
Activity Ratios: May be this is the only good sign regarding Sales / Total assets where the current level is higher than the industry average which means that the company is generating sufficient volume of sales out of its assets, however this doesnt mean that the company is gaining. As for the collection period, this is a real problem where the average collection period exceeds the market average by 22 days. This indicates that the company will not be able to generate cash in the right time because of the delay in collection, consequently it will have a liquidity squeeze. This will prevent the company from using its productive assets. The sales ratio is below the average by 30.6 leading to the conclusion that the working capital is not used efficiently enough to generate acceptable volume of sales. For the inventory turnover ratio the current level is far below the average due to the fact that the company is holding an excessive stock of inventory and this excess stock are unproductive representing an investment with low or zero rate of return.
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Human Resources (Restructuring as a way to improve performance) (Linking Performance & Pay to Strategies HR) Human Resource Objectives Helping the organization reach its goals. Employing the skills and abilities of the workforce efficiently. Providing the organization with well-trained and wellmotivated employees. Increasing to the fullest the employees job satisfaction and self-actualization. Developing and maintaining a quality of work life that makes employment in the organization desirable. Communicating HRM policies to all employees. Helping to maintain ethical policies and socially responsible behavior.
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1.
Organizational objectives: to achieve the required organization effectiveness and objectives and ensure that the organization always has people with the right abilities available to do the right work HRM and Organizational Effectiveness HRM activities play a major role in ensuring that an organization will survive and prosper. Organizational effectiveness or ineffectiveness is described in terms of: Performance Employee satisfaction Absenteeism and turnover
Training effectiveness and its return on investment Accident rates
2. 3.
4.
Functional Objectives: maintain the departments contribution at a level appropriate to the org. needs Societal Objective : respond ethically and socially to the challenges of the environment while minimizing the negative impact of such demands on the organizations Personal objectives: to assist retain and motivate the employees for achieving their personal goals and guide them to better achievement (most important ) Human Resource Policies and Programs (Key Strategic HRM Concepts That Must Be Applied) Preparation and selection: Review of the employees' job description, job specification and job performance standard to match the change of the organization. Succession Planning: the preparation of the company succession plan will enable the organization to stand any future challenges. Career Path and development: the preparation of the career path for the employees will help the stability and minimize the turnover of the employees. Recruitment: designing a good recruitment process (Selection, interviews) with a high level of orientation
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to ensure the compatibility of the new recruited employees with the existing culture to achieve organizational objectives. Training and development: on-thejob training, Off-theJob training and Provide career planning assistance for employees. Incentive system will ensure the motivation of the employees to better performance (linking incentive to production) Compensation Policies and protection: What employees get in exchange for their contribution to the organization, maintain, retain productive workforce, achieve the org. objectives Testing: Will ensure the qualification of the candidates and their fit in the organization culture. Managing workforce diversity( if the organization is going internationally) Enhance employee participation: in implementing our strategy, all employees from different organizational levels must make a meaningful contribution in decisionmaking .this will increase employee's involvement and enhance their working life balance. Enhance employee organizational commitment: by increasing job involvement, which results in lower levels of absenteeism and turnover. Implementing employee recognition programs: starting with personal attention and ending with appreciation for a job well done. Develop effective staffing plans supporting the organizational strategies by allowing to fill job openings proactively (in terms of number and the quality of the workforce for the short and long term) VIP in case of international operations.( if the company is multinational) Job analysis Human resource planning
Human Resource Management (HRM) Activities:
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Employee recruitment, selection, motivation, and orientation Performance evaluation and compensation Training and development Labor relations Safety, health, and wellness Four descriptions of the HRM function: 1. It is action-oriented 1. Effective HRM focuses on action rather than on record keeping, written procedure, or rules. 2. It stresses on action. 3. It emphasizes the solution of employment problems to help achieve organizational objectives and facilitate employees development and satisfaction. 2. It is people-oriented 1. Whenever possible, HRM treats each employee as an individual and offers services and programs to meet the individuals needs. 3. It is globally-oriented 1. It is a globally oriented function or activity. 2. It is being practiced efficiently and continuously in Mexico, Poland, and Hong Kong. 3. American practitioners review best-in-class HRM practices in Brazil to determine if some principles can be applied or modified to work in the United States. 4. It is future-oriented 1. Effective HRM is concerned with helping an organization achieve its objectives in the future by providing for competent, well-motivated employees. 2. Thus, human resources need to be incorporated into an organizations long-term strategic plans. Competencies Needed by HR Professionals: Communication skills
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Problem solving Leadership Recruiting/staffing Employment law Training and development Technology Forecasting
Compensation design Benefits design and administration Accounting and finance Record keeping HRMs Place in Management HRM must: Ascertain specific organizational needs for the use of its competence. Evaluate the use and satisfaction among other departments. Educate management and employees about the availability and use of hrm services. External Environmental Influences Government (Laws and regulations) The Union Economic Conditions (Domestic and international) Competitiveness ( competitive advantage) Work Sector of the Organization ( Private and Public Sector) Composition and Diversity of the Labor Force Geographic Location of the Organization Internal Environmental Influences Strategy 47
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Goals Organization culture Nature of the task (job) Work group Leaders style and experience HRM Activities That Can Enhance and Sustain Competitive Advantage
Employment security. Selectivity in recruiting. High wages. Incentive pay. Information sharing. Participation and empowerment. Teams and job redesign. Training as skill development. Cross-utilization and cross training. Promotion from within Measurement of practices. Major HRM Problems for the International Corporation Selecting and training local managers. Companywide loyalty and motivation. Speaking local language and understanding local culture. Appraising managers overseas performance. Planning systematic management succession. Hiring local sales personnel. Compensating local foreign managers. Hiring and training foreign technical employees.
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Selecting and training international managers for overseas. Dealing with foreign unions and labor laws. Promoting or transferring foreign managers. Compensating international managers for an overseas assignment. Contributions of HR to Business Strategy Implementation & Formulation
Strategic HRD involves aligning HRD activities with the company's vision, mission, and strategic goals, so that enhancing the KSAs of employees at all levels grows both the individual and the organization.
SHRD can ensure that employees possess the necessary KSAs to manage new demands arising from changes in the competitive environment so HRD can help implement business strategy through : 1. Identifying what do our people need to be good at? (and then helping to provide these KSAs) 2. Fostering a learning climate that prepares people to cope with uncertainty and mindset-shift 3. Supporting the development of change agents and transformational leaders 4. Adjusting training to the companys business lifecycle 5. Remedying top managers KSA discrepancies: leadership, vision, communication, team building, etc. 6. Enabling employees to become more innovative and drive business strategy from the bottom-up And on other side HRD can help integration through : business strategy
1. Enabling the implementation of cost reduction strategies by helping remaining employees learn to do more with less
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2. Enabling rapid adjustment to changes in market conditions, and the implementation of customer responsiveness strategies, requiring multi-skilling, lean production, autonomous working groups, empowerment, delay ring, matrix structures, project based teams, etc. and teamwork So employees will need to be prepared for and helped to adjust to job enrichment
Outcomes of Strategic HR At the end of all strategic HR process we expect an increase in the competitive advantage to the organization such as: Increased performance Customer and Employees Satisfaction Enhanced Shareholder value
Analysis of Strategic Factors (SWOT) Grand strategies (3 Direction Model) Growth Stability Retrenchment Adding new Maintain/ increase MKT Cut into pieces businesses share (cut /drop businesses) Market still booming (not saturated) New product Same product New market Same market High R&D Flat R&D High Investment Flat investment High competition Stable environment M&A, Integration, market penetration Bankruptcy, sell out, Strategic divest, liquidation Alliances, Joint ventures I Growth Strategies (Vertical Integration
Strategies)
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o Can be achieved by taking over a function previously provided by a supplier or by a distributor. The company grows by making its own supplies and/or by distributing its own products. o This may be done in order to reduce costs, gain control over a scarce resource, guarantee quality of a key input, or obtain access to potential customers. o This growth can be achieved whether internally by expanding current operations or externally through acquisitions.
o Vertical growth is a logical strategy for a corporation or business unit with a strong competitive position in a highly attractive industry-especially when technology is predictable and markets are growing. o To keep and even improve its competitive position, the company may used backward integration to minimize resource acquisition costs and inefficient operations as well as forward integration to gain more control over product distribution. o A companys degree of vertical integration can range from total ownership of the value chain needed to make and sell a product to no ownership at all.
o Under full integration, a firm internally makes 100% of its key supplies and completely controls its distributors. I.e. large oil companies. o Long-term contracts are agreements between two separate firms to provide agreed-upon g0oods and services to each other for a specified period of time. This cant really be considered to be vertical integration unless the contract specifies that the supplier or distribute cant have a similar relationship with a competitive firm. 1. Backward integration (Ownership or Control -- Firms suppliers)
Guidelines:
Current suppliers expensive or unreliable # of suppliers is small; # competitors is large High growth in industry sector
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Firm has both capital & HR to manage new business Stable prices are important Current suppliers have high profit margins 2. Forward integration (Gain Control over ---Distributors, Retailers)
Guidelines:
Current distributors expensive or unreliable Availability of quality distributors limited Firm competes in industry expected to grow markedly Firm has both capital & HR to manage new business of distribution Current distributors have high profit margins Horizontal integration (Ownership or Control --Firms competitors) o Can be achieved by expanding the firms products into other geographic locations and/or by increasing the range of products and services offered to current markets. In this case, the company expands sideways at the same location on the industrys value chain. A company can grow horizontally through internal development or externally through acquisitions or strategic alliances with another firm in the same industry. Horizontal growth results in horizontal integrationdegree to which a firm operates in multiple geographic locations at the same point in an industrys value chain. Horizontal integration for a firm may range from full to partial ownership to long-term contracts

3.
Guidelines:
Gain monopolistic characteristics w/o federal government challenge
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Competes in growing industry Increased economies of scale major competitive advantages Faltering due to lack of managerial expertise or need for particular resource A corporation can grow internally by expanding its operations both globally and domestically, or it can grow externally through mergers, acquisitions, and strategic alliances.
- A merger is a transaction involving two or more corporations in which stock is exchanged, but from which only one corporation survives. Mergers usually occur between firms of somewhat similar size and are usually friendly. The resulting firm is likely to have a name derived from its composite firms. - An acquisition is the purchase of a company that is completely absorbed as an operating subsidiary or division of the acquiring corporation. Acquisitions usually occur between firms of different sizes and can be within friendly or hostile. Hostile acquisitions are often called takeovers. - A strategic alliance is a partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial. Growth is a very attractive strategy for two key reasons: Larger firms also have more bargaining power than do small firms and are more likely to obtain support from key stakeholders in case of difficulty. A growing firm offers more opportunities for advancement, promotion, and interesting jobs. Growth itself is exciting and ego-enhancing for CEOs. The marketplace and potential investors tend to view a growing corporation as a winner or on the move. Executive compensation tends to get bigger as an organization increases in size. Large firms are also more difficult to acquire than are smaller ones; thus an executives job is more secure.
II Intensive Strategies
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1. Market Penetration (Increased Market Share) o Present products/services o Present markets o Greater marketing efforts
Guidelines:
o Current markets not saturated o Usage rate of present customers can be increased significantly o Shares of competitors declining; industry sales increasing o Increased economies of scale provide major competitive advantage Is a strategy for company growth by increasing sales of current products to current market segments without .changing the product Increase sales to current users Attract users of competition - Convince non users of the product 2. Market Development (New Markets -- Present products/services to new geographic areas)
Guidelines:
o New channels of distribution reliable, inexpensive, good quality o Firm is successful at what it does o Untapped/unsaturated markets o Excess production capacity o Basic industry rapidly becoming global o Is a strategy for company growth by identifying and developing new market segments for current products Develop new markets in the same area Develop more distribution channelsDevelop new markets in other areas 3. Product Development(Increased Sales -- Improving present products/services, Developing new products/services)
Guidelines:
o Products in maturity stage of life cycle
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o Industry characterized by rapid technological development o Competitors offer better-quality products @ comparable prices o Compete in high-growth industry o Strong R&D capabilities Is a strategy for company growth by offering modified or .new products to current market segments
Improve or add on current product features Improve on current product quality Develop new product in the same category -
III
Diversification Strategies
A series of choices for each product/market condition,*** :choices can be expressed in terms of five types of strategy
.Maintenance of the current competitive position .1 .Improvement of the current competitive position .2
Harvesting, which involves reducing or relinquishing the .3 current competitive position in order to capitalize upon .short-term profit and improve cash flow Exiting, this typically occurs when the company is .4 suffering from a weak competitive position or recognizes that the cost of staying in the market and/ or improving .upon the position is too high 5. Entry to a new sector. - When an industry consolidates and becomes mature, most of the surviving firms have reached the limits of growth using vertical and horizontal growth strategies. - Unless the competitors are able to expand internationally into less mature markets, they may have no choice but to diversify into different industries if they want to continue growing. 1. Concentric Diversification (New & related products/services) (Technologically related products /New & related products/services) growth through concentric diversification into a related industry may be a very appropriate corporate strategy when a firm has a strong competitive position but industry attractiveness is low.
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- By focusing on the characteristics that have given the company its distinctive competence, the company uses those very strengths as its means of diversification. - The firm attempts to secure strategic fit in a new industry where the firms product knowledge, its manufacturing capabilities, and the marketing skills it used so effectively in the original industry can be put to good use. - The corporations products or processes are related in some way; they possess some common thread. The search is for synergy, the concept that two businesses will generated more profits together than they could separately. The point of commonality may be similar technology, customer usage, distribution, managerial skills, or product similarity. - The firm may choose to diversify concentrically through internal / external means.
Guidelines:
o Compete in no/slow growth industry o New & related products increases sales of current products o New & related products offered at competitive prices o Current productsdecline stage of product life cycle o Strong management team This strategy involves the add of a new but related products or services. One may argue that this represent a contradiction of policies if adopting the first (retrenchment) strategy, I would say absolutely not as saving the cost that will happen as a result of the first strategy will make money available to develop a new products that can match with the new trend in the market where people are heading toward nutrition . It is worth mentioning that the company will assume no extra costs to develop the new product as the platform of the product exist and all what will it take is to change the ingredients toward more natural and less fat ingredients. Implementation: This will also involve change in organizational structure. Shift toward natural ingredients.
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Set a promotional plan to attract the consumer depending on the brand that have become healthier and contains low fats. To diversify the distribution channel and not to give a large share to one distributor plus emphasis more control on the receivables. Provide training to the staff through across the various functions of the company.
2. Conglomerate Diversification (New & unrelated products/services) (Seeking non related products or markets) when management realizes that the current industry is unattractive and that the firm lacks outstanding abilities or skills that it could easily transfer to related products or services in other industries, the most likely strategy is conglomerate diversification. - Conglomerate div., diversifying into an industry unrelated to its current one. - Rather than maintaining a common thread throughout their organization, strategic managers who adopt this strategy are primarily concerned with financial considerations of cash flow or risk reduction. - The emphasis in conglomerate diversification is on financial considerations rather than on the productmarket synergy common to concentric diversification. - A cash-rich company with few opportunities for growth in its industry might move into another industry where opportunities are great but cash is hard to find. - Another instance of conglomerated diversification might be when a company with a seasonal and, uneven cash flow purchases a firm in an unrelated industry with complementing seasonal sales that will level out the cash flow.
Guidelines:
o Declining annual sales & profits o Capital & managerial ability to compete in new industry o Financial synergy between acquired and acquiring firms o Current markets for present products saturated 3. Horizontal Diversification (New & unrelated products/services for current customers) 57
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Guidelines:
o Adding new products/services would significantly increase revenues o Highly competitive and/or no-growth industry; low margins & returns o Current distribution channels can be used o New products have counter cyclical sales patterns
IV
Defensive Strategies
1. Retrenchment (Regrouping , Cost & asset reduction to reverse declining sales & profit) a company may pursue retrenchment strategies when it has a weak competitive position in some or all of its product lines resulting in poor performance-sales are down and profits are becoming losses. - These strategies impose a great deal of pressure to improve performance. In an attempt to eliminate the weaknesses that are dragging the company down, management may follow one of several retrenchment strategies ranging from turnaround or becoming a captive company to selling out, bankruptcy, or liquidation. Turnaround strategy emphasizes the improvement of operational efficiency and is probably most appropriate when a corporations problems are pervasive but not yet critical. - The two basic phases of a turnaround strategy are contraction and consolidation. - Contraction is the initial effort to quickly stop the bleeding with a general across-the-board cutback in size and costs. - The second phase, consolidation, implements a program to stabilize the now-leaner corporation. - To streamline the company, plans are developed to reduce unnecessary overhead and to make functional activities cost-justified. This is a crucial time for the organization. - If the consolidation phase is not conducted in a positive manner, many of the best people leave the organization. - If all employees are encouraged to get involved in productivity improvements, the firm is likely to emerge from this retrenchment period a much stronger and better
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organized company. It has improved its competitive position and is able once again to expand the business. Present special strategic management challenges. In such situations, a firm may be in bankruptcy or nearing bankruptcy. Often turnaround consultants are brought into the company to devise and execute a plan of corporate renewal, assuming that the firm has enough potential to take it worth saving. Before a viable turnaround strategy can be formulated, one must identify the root cause or causes of the crisis. Frequently encountered causes include:
Revenue downturn caused by a weak economy Overly optimistic sales projections Poor strategic choices Poor execution of a good strategy High operating costs High fixed costs that decrease flexibility Insufficient resources Unsuccessful R&D projects Highly successful competitor Excessive debt burden Inadequate financial controls
While each case is unique, the turnaround process frequently involves the following stages: 1. Management change - consultants may be called in to manage the turnaround of the firm. 2. Situation analysis - a situation analysis is performed to evaluate the prospects of survival. Assuming the firm is worth turning around, depending on the root causes of the distress one or more of the following turnaround strategies may be selected and presented to the board:
o
Change of top management
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o o o o o
Divestment of certain assets Reformulation of strategy Revenue increase Cost reduction Strategic acquisitions
3. Emergency action plan - achieve positive cash flow as soon is possible by eliminating departments, reducing staff, etc.
4. Business restructuring - once positive cash flow is achieved, the strategic plan is implemented, improving continuing operations, adjusting the product mix and repositioning products if necessary. The management team begins to focus on achieving sustained profitability. 5. Return to normalcy - the company becomes profitable and the changes are internalized. Employees regain confidence in the firm and emphasis is placed on growing the restructured business while maintaining a strong balance sheet. Captive Company Strategy; is the independence in exchange for security. giving up of
- A company with a weak competitive position may not be able to engage in a full-blown turnaround strategy. - The industry may not be sufficiently attractive to justify such an effort from either the current management or from investors. - Nevertheless a company in this situation faces poor sales and increasing looses unless it takes some action. Management desperately searches for an angel by offering to be a captive company to one of its larger customers in order to guarantee the companys continued existence with a long-term contract. - In this way, the corporation may be able to reduce the scope of some of its functional activities, such as marketing, thus reducing costs significantly. - The weaker company gains certainty of sales and production in return for becoming heavily dependent on one firm for at lease 75% of its sales. Sell-Out/divestment Strategy; if a corporation with a weak competitive position in its industry is unable either to pull itself up or to find a customer to 60
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which it can become a captive company, it may have no choice but to sell out. - The sell-out strategy makes sense if management can still obtain a good price for its shareholders and the employees can keep their jobs by selling entire company to another firm. - The hope is that another company will have the necessary resources and determination to return the company to profitability. - If the corporation has multiple business lines and it chooses to sell of a division with low growth potential, this is called divestment. Bankruptcy/Liquidation Strategy; when a company finds itself in the worst possible situation with a poor competitive position in an industry with few prospects, management has only a few alternatives-all of them distasteful. - Because no one is interested in buying a weak company in an unattractive industry, the firm must pursue a bankruptcy or liquidation strategy. Bankruptcy involves giving up management of the firm to the courts in return for some settlement of the corporations obligation. Top management hopes that once the court decides the claims on the company, the company will be stronger and better able to compete in a more attractive industry. - In contrast to bankruptcy, which seeks to perpetuate the corporation, liquidation is the termination of the firm. Because the industry is unattractive and the company too weak to be sold as a going concern, management may choose to convert as many saleable assets as possible to cash, which is then distributed to the shareholders after all obligations are paid. - The benefit of liquidation over bankruptcy is that the board of directors, as representatives of the shareholders, together with top management makes the decisions instead of turning them over to the court, which may choose to ignore shareholders completely.
Guidelines:
o Failed to meet objectives & goals consistency; has distinctive competencies 61
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o Firm is one of weaker competitors o Inefficiency, low profitability, poor employee morale, pressure for stockholders o Strategic managers have failed o Rapid growth in size; major internal reorganization necessary This involves the regrouping through costs and assets reduction to reverse the declining in sales and profit. This could be done through Turnaround move to emphasize the improvement of operational efficiency, its appropriate in this case specially that the company suffers pervasive but not yet critical problems. How to implement this strategy (tactics): 1) To reduce the unnecessary work force this represents % of the sales. 2) To streamline the company and develop a plan to reduce unnecessary overhead through a consolidation policy and to make functional activities cost justified which means to better allocate the cost through different functions of the company. 3) Initial efforts must be made to stop the bleeding through a contraction policy with a general across the board cutback in sizes and costs. 4) the most important step is to change the organizational structure by appointing a new CEO who will be in charge to run the business. 5) This may involve eliminating one or more of the production lines to concentrate on only on those lines contributing to the profit.
2. Divestiture (Selling a division or part of an organization)
Guidelines:
o Retrenchment failed to attain improvements o Division needs more resources than are available o Division responsible for firms overall poor performance o Division is a mis-fit with organization o Large amount of cash is needed and cannot be raised through other sources
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3. Liquidation (Selling , Companys assets, in parts, for their tangible worth)
Guidelines:
o Retrenchment & divestiture failed o Only alternative is bankruptcy o Minimize stockholder loss by selling firms assets o Market Strategies(Leader/Follower/Nicher/Challenger)
1.
Market Leader strategy
2.

Expansion of the over all market Identify new users Increase usage rate in more occasions Expansion of current market Heavy promotion effort Geographic and distributors expansion Merger and acquisition New product development Guarding the existing market share Strong market position Developing and sustaining a meaningful competitive advantage Continuous product and process innovation A generally proactive stance Heavy advertising Strong customer relationship Strong distribution relationship 2. Market Challenger strategy 1. Attack the market leader 2. Attack firms of similar but underprivileged 3. Attacking small firm
3.

4.

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In succeed in attacking the market leader he should
Have a sustainable competitive advantage Neutralize the leaders advantage by excelling in what the leader does best Impede our counter attack the leaders relation 3. Market Follower strategy 4. Cloner (copy) 5. imitator 6. Adapter 4. Market Nicher strategy when the firm 1. Has sufficient size and purchase power 2. Has growth potential 3. Is negligible interest to major competitors 4. Has required skills and resource to serve the nich in a superior fashion Means for Achieving Strategies (1) Joint venture/Partnering two or more companies form a temporary partnership or consortium for purpose of capitalizing on some opportunity. Why Joint Ventures Fail Managers who must collaborate daily; not involved in Benefits the company not the customers Not supported equally by both partners May begin to compete with one of the partners
developing the venture
Guidelines Synergies between private and publicly held Domestic with foreign firm, local management can Complementary distinctive competencies
reduce risk
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Resources & risks where project is highly profitable Two or more smaller firms competing w/larger firm Need to introduce new technology quickly
(e.g. Alaska Pipeline)
(2)Merger/Acquisition Provide improved capacity utilization Better use of existing sales force Reduce managerial staff Gain economies of scale Smooth out seasonal trends in sales Gain new technology Access to new suppliers, distributors, customers, products, creditors (3)Outsourcing Outsourcing in needed because the firm has to focus on its core business and should provide better services - Companies taking over the functional operations of other firms Benefits Less expensive Allows firm to focus on core business Enables firm to provide better services
V. Michael porter's generic strategies

1-Cost Leadership Is a low-cost competitive strategy that aims at the broad mass market and requires aggressive construction of 65
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efficient-scale facilities, cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like R&D, service, sales force, advertising, and so on. Because of its lower costs, the cost leader is able to charge a lower price for its products than its competitors and still make a satisfactory profit. Being the low-cost competitor in an industry while maintaining satisfactory profit margins Low Cost Producer Advantage
Many price-sensitive buyers Few ways of achieving differentiation Buyers not sensitive to brand differences Large # of buyers w/bargaining power
A- Low cost strategy that offers products to a wide range of customers at the lowest price available in the market B- best-value strategy that offers product to a wide range of customers at the best price-value in the market
Sources of Cost Reduction

Product Design-----------------------Government Subsidies--------------Efficient Labor --------- --------------New Delivery Methods-------------Production Innovations-------------Obtain inexpensive raw materials Create efficient operations---------Control overhead costs-------------Avoid marginal customers---------
2-Differentiation Competitive Advantage
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Advantage achieved when a firm provides something that is unique and valuable to buyers beyond simply offering a lower price Is aimed at the broad mass market and involves the creation of a product or service that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product. This specialty can be associated with design or brand image, technology, features, dealer network, or customer services. Differentiation is the viable strategy for earning above-average returns in a specific business because the resulting brand loyalty lowers customers sensitivity to price. Increased costs can usually be passed on to them buyers. Buyer loyalty also serves as an entry barrier new firms must develop their own distinctive competence to differentiate their products in some way in order to compete successfully. Differentiation strategy is more likely to generate higher profits than is a low-cost strategy because differentiation creates a better entry barrier. A low-cost strategy is more likely, however, to generate increases in market share. Greater product flexibility Greater compatibility Lower costs Improved service Greater convenience More features
Common Differential Advantages

Brand names------------
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Strong dealer network Product reliability-----Image--------------------Service-------------------
3-Niche Competitive Advantage Producing products that fulfill the needs of small groups of customers A- low-cost focus strategy that offers products to small range of customers (niche) at lowest price in the market B- best-value focus strategy that offers products to a small range of customers at the best price-value in the market Cost focus is a low-cost competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche, to the exclusion of others. - In using cost focus, the company or business unit seeks a cost advantage in its target segment. - Keeping overhead and R&D to a minimum and by focusing its marketing efforts strictly on its market niche. - The cost focus strategy is valued by those who believe that a company or business unit that focuses its efforts is better able to serve its narrow strategic target more efficiently than can its competition. It does, however, require a trade off between profitability and overall market share. Industry segment of sufficient size Good growth potential Not crucial to success of major competitors
Advantage achieved when a firm target and effectively serve a small segment of the market Used by small companies with limited resources used in a limited geographic market
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focused on a specific product line
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Cost Leadership - Low-cost competitive strategy Broad mass market Efficient-scale facilities Cost reductions Cost minimization Cost-Focus Low-cost competitive strategy Focus on market segment Niche focused Cost advantage in market segment
Differentiation Broad mass market Unique product/service Premiums charged Less price sensitivity
Differentiation Focus Specific group or geographic market focus Differentiation in target market Special needs of narrow target market
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Strategies and Recommendations Strategy Aggressive Offensive Recommendation - Market penetration Mrkt, Finance, HR Market development Product development Backward integration Forward integration Horizontal integration Conglomerate diversification Concentric Horizontal or a combination of these Market penetration, market development, product development,
Conservative
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Defensive Competitive
concentric diversification Retrenchment, divestiture, liquidation, or concentric diversification Backward, forward and horizontal integration, market penetration, market development, product development, and joint ventures
BCG model (There should be data about divisions)
Determine the different products of the company where do they stand in the matrix
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Stars: Are high growth, high share business or products. The often need heavy investments to finance their rapid growth Eventually their growth will slow down and they will turn into cash cows
Cash Cows: Are low growth, high share business or products These established & successful SBUs need less investment to hold their market share They produce a lot of cash that the company uses to pay its bills & to support other SBUs that need investment
Question Marks: Are low share business units in high growth markets They require a lot of cash to hold their share, let alone increase it Management has to think hard about which question marks it should try to build into stars and which should be phased out
Dogs: Are low-growth, low-share businesses & Products They may generate enough cash to maintain themselves but do not promise to be large sources of cash
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Build Build Hold Hold Harvest Harvest Divest Divest
Provide financial resources if SBU (Problem Child) has potential to be a Star. Preserve market share if SBU is a successful Cash Cow. Use cash flow for other SBUs. Increase short-term cash return. Appropriate for all SBUs except Stars. Get rid of SBUs with low shares in low-growth markets.
Implementation: This will also involves change in organizational structure . Shift toward natural ingredients. Set a promotional plan to attract the consumer depending on the brand that have become more healthy and contains low fats. To diversify the distribution channel and not to give a large share to one distributor plus emphasis more control on the receivables. Provide training to the staff through across the various functions of the company.
Recommended Strategy Use TWOS Matrix to draw the strategic alternatives Explain what are the most feasible alternative strategies available to the firm and what are the pros and cons of each? Consider cost leadership and differentiation as business strategies Consider stability, growth and retrenchment as corporate strategies
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1

Strategic Audit - ___________

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Stock Market trend Foreign countries economic conditions Monetary policies

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advertising and publicity ethical issues

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The Functional Structure

Strategic Audit - ___________

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22 Restructuring, Reengineering Reshaping Corporate Landscape

1. Restructuring, also called downsizing, rightsizing, or delayering, involves

Strategic Audit - ___________

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a) Force change strategy b) Educative change strategy

Strategic Audit - ___________

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Marketing (STP and 4Ps) Market segmentation, Targeting and Positioning

Culture that can be seen at the surface level

Marketing segmentation (Level of market segmentation)

Strategic Audit - ___________

o Very large segment

o One-to-One Marketing o Customerization Segmenting consumer markets

Strategic Audit - ___________

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Criteria of Positioning: 1. Feature / Benefits:

the product benefit for customers User Category:

Strategic Audit - ___________

Strategic Audit - ___________

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Under-posirioning: Failing to present benefit or reason to buy this brand

Product and Service Strategies

Pricing Policies and Strategies

The Promotional Plan

The Distribution Plan

Strategic Audit - ___________

2. brand extension: launching new same brand

Strategic Audit - ___________

Promotion: Promotional Strategy:

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Building up good corporate image

Strategic Audit - ___________

Selecting channels Based on: Years on business 37

Growth record Financial strength Service reputation

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