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Corporate strategy: strategy is a mean for achieving a long term goal for the company; this could include

geographic expansion, diversification, acquisition & so forth. Strategic Management is the art & science of formulating, implementing and evaluating cross functional decisions that help the organization in achieving its goal.
1. Strategy Formulation developing mission, vision, identifying the

organization's strengths and weaknesses then choosing a course of strategies that best suit the business.
2. Strategy Implementation requires the firm to establish annual

objectives, motivate employees, allocate resources and align the marketing, operations and finance departments efforts to achieve the organizational goal.
3. Strategy Evaluation is the final stage , (1) strategist review internal

and external forces (2) measure performance (3) taking corrective actions Five Elements of strategy: Determinants Of Competitive Advantage Vision: answers the organization's question of "what do we want to become"? Mission: explains why does the company exist, or it is a statement that differentiates one business from another. Goal: is a result or long term target that a company intends to achieve should be SMART Objectives: are short term targets 9 Essential Components Of Mission Statement 1. Customers 2. Products or services 3. Markets 4. Technology 5. Growth & profitability

6. 7. 8. 9.

Philosophy Self concept Public image Employees

Value chain: group of interrelated systems that work together in order to deliver a good or service to the customer. For example, the value chain of Coke & Pepsi consists of 4 steps 1234Production (focus on manufacturing) Marketing (managing brand portfolio) Packaging (bottling) Distribution (resale)

In order to build a profitable business, we should analyse the external environment in which the firm operates, which presents opportunity & threat for the company. For example, firms must understand that for every market there are different entry and distribution requirements. For example, when coke entered the wine industry in 1977, it swallowed industry giants as Taylor & sterling vineyard, yet after couple of years coke had problems in distribution & made huge losses, finally it sold the wine business. What Is An Industry? Fragmentation & Concentration It is important for the business to understand the market they are operating in, whether its i fragmented market (no leader for the industry- perfect competition) or concentrated market (oligopoly- 2 firms are leading the industry). For example, Coke & Pepsi are operating in concentrated market. Second, the firm should determine the constitutes of the market (specific segment they want to serve). For example, Lipton (tea), Starbucks (coffee), Heineken (beer), ocean spray (juice), coke & Pepsi (Soft drinks).

Chapter 3 Describe How To Conduct External Strategic Management Audit Companies perform external audit to list some of the external opportunities that the company should exploit as well as the threats that should be avoided. There are 5 external forces that affect the company's performance. The Industrial Organization (I/O) view The IO theory contends that the company is successful to the extent it can exploit that external opportunities and limit the external threats. Porter's five model theory is categorized under the IO theory. And it contends that the firm's performance is related to the external forces as the industry growth, economies of scale, barriers to market entry, differentiation and gives a little concern to the internal forces as marketing departments, financial departments and so on. External forces 1. Economic Forces Such as changes in interest rates increase the costs of acquiring funds and cause a shrink in the investments. Changes in exchange rate affect the country's overall performance in the global market which in turn affects the small corporations. For example, as the dollar weakens against the Euro and the Yen, domestic tourism firms benefit as Americans do not travel abroad. 2. Social , Cultural , Demographic and Environmental Forces Changes in society formulation create new customer types that require different products and services that meet their needs. For example, by 2050 number of Americans how are 100 years old is going to increase by 8 folds. Some corporations offer what is called "life care facilities" these complexes exceed 2 million these facilities include Hyatt, Marriot and others. 3. Political , Governmental and Legal Forces For example, some large multinational companies as Gillette, polo Ralph Lauren are moving their manufacturing firms from France and Germany to Ireland to avoid taxes. Another example, US, Japan & Europe are having problems with china due to the fixed Yuan exchange rate which undervalue the

Chinese currency and makes the Chinese products cheaper than other country's products.

4. Technological Forces Internet is changing the opportunities and threats for businesses. For example, brick and mortar companies are faced by huge threat from the click and mortar companies as Amazon & E-bay. Universities are facing threats from online lecturers who offer their syllabus on demand. 5. Competitive Forces An important part in the external audit is to identify the rival's strengths, weaknesses. For example, competition in most of the industries is a cut throat competition, when Italian car maker fiat was facing some financial problems; Ford, Peugeot and Renault boosted their advertising in the Italian market which resulted in a decrease in the market share of Fiat from 40% to 27%. Porters Five Force Model There are 5 countervailing sources of power that affect the industrys profits 1- Rivalry the intense competition affects the firm's ability to make profit, some of the techniques used to differentiate the product are

Price leadership: giving away some of the profit margin to decrease the price of the product and win market share, offering price reduction depends on the size of the company. For example, Microsoft has many competitors, yet none of them can offer low prices as Microsoft (Large number of units over fixed cost less Cost/Unit). Focuser: Carving a niche market & serving them (for example Ferrari)

2- Threat of Entry & Exit: The degree to which new competitors can enter the market & intensify competition. The conditions that make it difficult to enter to a market are called barriers to entry. This may be strong brand loyalty, high market share, Strong presence, advanced technology. The greater the resources needed to delve into a specific market the higher the barriers to entry. Example (Virgin & coke, 7 Eleven stores)

3- Supplier Power the degree to which suppliers have influence on the price of raw materials, delivery time, payment terms is referred to as suppliers power, which affect the profitability of the industry. Suppliers are powerful if they are concentrated, own rare inputs or are bigger than their customers. Example (Coke & Pepsi, Sweeteners, water, No control) Supplier power also present a threat when the suppliers can forwardly integrate , for example when the suppliers have the ability not only to supply materials but also to get involved in the production process. For instance, coca cola and Pepsi could integrate forwardly by packaging their own bottles instead of giving them to suppliers. 4- Buyer Power the degree to which buyers have influence on the price of a certain product, this take place when there are more than one business in the industry , and variety of choices are present, the Internet boosted the consumers ability to make choices by using rating websites to compare prices and quality. Example (tire makers) 5- Threat Of Substitutes: the degree to which products in other industries can influence the demand on another product because it satisfies the same need. Example, product substitutes include coke for Pepsi and chipsy for lays.....Etc. The more substitutes available for a product the more it's profit will be affected by movements of other companies. Example Netflix,, blockbuster, iTunes, on demand streaming. External Factor Evaluation Matrix An external factor evaluation matrix allow strategists to summarize PEST factors 1. List the threats & opportunities 2. Assign a weight for each factor from 0 (not important) to 1 (important) 3. Assign a rating for between 1 & 4 to each factor 4. Multiply the rating with the weight 5. Sum the weighted scores The Competitive Profile Matrix (CPM) 1. List the external and internal sources of success in the company 2. Provide a weight for each key success factor (KSF) 3. Provide a ranking for each KSF 4. Multiply 2 with 3

Chapter 4 Internal Audit: performing in an internal audit requires assimilating and gathering information from different departments, accountingetc. The process of internal audit is 2 fold, it helps in unveiling the companys internal strengths as well as improving communication among involved departments it also helps the employees to understand how their tasks contribute to the success of the company as whole Key Internal Forces are firms strengths that cannot be easily copied or imitated are called distinctive competence which is used in building the companys competitive position. The Resource Based View (RBV): the RBV contends that internal company strengths are more important than external resources in sustaining competitive advantage. There are 3 resources in any firm. 1- Human resources: include employees, training, skills 2- Physical resources: capacity, location, equipment, raw materials 3- Organizational resources: information systems, patents, copyrights...etc

For a resource to be valuable it must be 1- Rare: (ex) 2- Hard to imitate: (ex) 3- Not substitutable: (ex) Management
1- Planning: refers to setting future goals, therefore planning is

considered a bridge between the present and the future. Planning enables a firm to conserver its resources, avoid wasting, making a fair profit. Planning also involves setting a forecast for the demand, budgeting, foreseeing the future trends
2- Organizing: involves breaking the tasks into jobs (work specialization)

and gathering jobs into departments (departmentalization) and (delegating the authority) which is allocating resources, what should be done and who should do it.
3- Motivating: could be defined as encouraging employees to achieve to

firms goals. Objectives, systems and policies have a little change to succeed if the employees are not motivated enough. Motivation could be (Monetary) or (Non Monetary). (Ex) top down & bottom up communication, open door policy
4- Staffing: recruiting , staffing, training, testing, selecting 5- Controlling: involves measuring the discrepancy between actual

planned results, this includes. First, setting standards. Second, measuring individual & actual performance. Third, comparing the actual performance to the planned performance. Fourth, taking corrective action.

1. Customer Analysis: needs, wants, demands, buying power,

segmentation, surveys
2. Selling Products / Services: marketing activities, publicity, logistics,

and advertising, customer and dealer relations. (ex)

3. Product & Service Planning: test marketing, packaging, product

features, product style, providing customer service.

4. Distribution: warehousing, distribution channels, inventory levels, sales

territories, location. Finance & Accounting: working capital, assets, profitability, cash flow. Financial factors alter existing strategies and change implementation plans. Production & Operations: consist of all activities involved to change the input to output. The basic functions of production management are, process, capacity, inventory, workforce and quality decisions. (Ex) Value Chain Analysis: firms will be profitable as long as revenues exceed the companys costs. VCA refers to the process whereby the company determines the cost associated with organizational activities from purchasing to production and determines where the cost advantage or disadvantage exists. First, divide the firms operations into certain activities. Second, attach cost to each activity. Third, convert the cost into information by looking at the weaknesses or strengths. (Ex) Benchmarking: is an analytical tool used to determine whether a firms value chain activities are competitive relevant to the industry and rivals to win in the market place. Benchmarking entails measuring costs of value chain activities across an industry to determine the best practices among competing firms to duplicate or improve those practices. The Internal Factor Evaluation (IFE): summarize and list the main internal strengths and weaknesses in the functional areas of a business. 1- List the internal factors as identified in the internal audit 2- Assign a weight from 0 (not important) to 1 (important) 3- Assign a rank from 1-4 to indicate whether that factor is major strength or weakness 4- Multiply each factor by its weight 5- Sum the weighted scores for each variable.

Discuss the Value Of Establishing Long Term Objectives

Long term objectives are the expected results from pursuing certain strategies, and strategies are actions to be taken to accomplish a long-term goal. Goals should be SMART . Provide direction, allow synergy between departments, and minimize distractions by unifying the goal to be attained. Identify 11 Types Of Business Strategies
1. Forward integration gaining increased control or ownership of

distributors and retailers thus eliminating the intermediary between the company & the customer and reducing costs. This strategy would be beneficial if the distributors are not reliable, expensive, the company has the human & physical resources to acquire distributors.
2. Backward integration companies purchase raw materials from

suppliers, its considered a good strategy to acquire the companys suppliers when they are unreliable or too costly or cannot meet the companys demand. Some companies depend on more than one supplier in case of problems faced by one of the suppliers.
3. Horizontal integration refers to merger and acquisition of competitors

to increase market share, economies of scale and gain advantage of other companys competencies.
4. Market penetration seeking to increase the companys market share

for present and future products through intensive advertising, hiring more salesperson and offering sales promotion.
5. Market development involves introducing present products to new

geographic areas
6. Product development increasing sales by improving or modifying

present products or services.

7. Related diversification acquiring companies that have same value

8. Unrelated diversification acquiring companies with different value


9. Divestiture refers to selling a division or part of the organization to

acquire capital for further strategic acquisition this could be a part of retrenchment.
10. Retrenchment refers to fortifying the companys main competencies

through cost & asset reduction. This could be achieved by selling obsolete machines, pruning product lines that are unprofitable, reducing number of employees.
11. Liquidation: selling all the company's assets for their market worth the business cease existence

Discuss Porters 5 Generic Strategies

Cost Leadership Strategies: emphasizes producing standardized products at low cost per unit. There are 2 types of cost leadership. First Low Cost which offers wide range of products at low price for cost sensitive customers. Second, is the Best Value strategy offers wide range of products for the customer @ the market price? Striving to be cost leader in a market could be achieved if the market consists of price sensitive buyers, when there are few differences from brand to brand. Therefore the company could follow forward or backward integration to lower their costs of production & distribution. Differentiation Strategies: a differentiation strategies could be pursued only after a proper research about customer preferences is made to determine the feasibility of incorporating one or more differentiating features in the product. The risk of pursuing a differentiation strategy is that product may not be highly valued by consumers to justify levying high prices on the product. Focus Strategies: companies could choose a specific customer, geographic markets, product line segment and focus on serving it instead of serving a broader market. Chapter 6 SWOT analysis: strength, weakness, opportunity and threats are an important matching tool that helps managers in developing 4 tools. 1. SO: allows the company to capitalize on its internal strengths to exploit the external market opportunities. 2. ST: using the company's internal strength to avoid external threats

3. WO: aims at improving internal weakness by taking advantage of external threats. 4. WT: are defensive tactics in which the company has internal weaknesses and surrounded by external threats. In this case, the company might merge, retrench, divest or declare bankruptcy.

BCG Matrix helps companies to manage the product portfolio in terms of market share & market growth. Relative market share is defined as the company's market share relative to the market share of the rival firm. 1. Question Marks: they are called question Marks because the future of these products is not settled yet. They have low market share, high market growth, they generate low cash but require spending a lot of cash to fuel their growth. 2. Stars: high market share, high market growth, high cash generation & need a lot of cash to finance their growth. 3. Cash cows: high market share, low market growth, high cash generation and high cash needs. Today cash cows were yesterday's stars. Product development could be followed in order for the cash cow to be converted again into a star. Yet, if the cash cow becomes weak retrenchment or divestiture is the ideal strategy to follow. 4. Dogs: low market share and low market growth, the company should dispose this product line to save costs. Limitations Of BCG Matrix IE Matrix is a matrix similar to BCG that is based on IFE weighted score on the X-axis & the EFE weighted score on the Y-axis. The IE matrix is divided in to 3 groups 1. I, II, IV: divisions that fall in this area are described as grow & build. Intensive strategies (product development, market development, market penetration), or integrative strategies as (backward, forward & horizontal integration) should be followed. 2. III , V, VII: hold & maintain , market penetration & development

3. VI, VIII, IX: harvest & divest, retrenchment, divestiture, liquidation

The Grand Matrix Strategy 1- Weak position in a growing market 2- Strong position in a growing market (I) (II)

3- Weak position in slow growth market (III) 4- Strong position in a growing market (IV)

The Nature Of Strategy Analysis & Choice Strategy analysis & choice seek to determine alternative courses of actions that could best enable the firm to achieve its objectives and goals. The Process Of Generating & Selecting Strategies 1. Developing a set of applicable strategies 2. Determining the pros and cons of each 3. Rank strategies according to their attractiveness with 1 = should not be implemented 2 = possibly should be implemented 3 =probably should be implemented 4 = definitely should be implemented. 4. Using one or more of the strategy formulation analytical tools Strategy Formulation Framework Input stage using analytical tools such as IFE ,EFE,SWOT, BCG, Grand strategy matrix Matching stage strategy is defined as matching the companys internal resources and skills with the external opportunities. The Decision Stage 1- Make list of firm's external opportunities , threats, internal strengths & weaknesses 2- Assign a weight for each key external & internal factor 3- Determine the attractiveness score 4- Compute the total attractiveness score 5- Compute the sum total attractiveness score Market segmentation Means dividing the market into subset of smaller markets according to customer needs & buying patterns, market segmentation is useful because of 1- Market development and market penetration requires identification of customer types, buying patterns and needs.

2- Allows efficient use of resources since mass production and mass advertising is not needed because the target is known. 3- Segmentation helps in tailoring the service according to the geographical area served this is known as (Geographical Segmentation) 4- Segmentation according to age, gender, family size, income & occupation is known as (Demographic segmentation) 5- Segmentation according social class (upper, middle, lower) is known as psychographic.