Strategic Management Process

Prof. Abdur Rab School of Business NSU

Strategy
Strategy is a comprehensive plan for accomplishing an orgn.s goals Goal-directed decisions and actions that match an organization's strengths and weaknesses with the opportunities and threats in its environment.

Strategic management
Strategic management involves those decisions and actions in which organizational members analyze the current situation; develop appropriate strategies; put those strategies into action; and evaluate, modify, or change those strategies as indeed. basic activities of strategic management are strategy formulation, strategy implementation, and strategy evaluation.

Steps in strategic Mgt. Process

Strategic Management
Strategic Management= Strategic planning +Implementation +Control

Strategic planning
Strategic planning involves those long term decisions and actions in which top management of an organization analyze the current situation, set long term goals and formulate appropriate strategies for achieving the long term goals.

Vision
Vision Where the company should be headed. Future product-technology-customer. What enterprise we want to become. Bill Gates : Empower people through great software any time, any place, and on any device.

Mission who we are and what we do.

Mission: Organizations present capabilities, customer focus, activities and business make up. Otis Elevator: Our mission is to provide any customer a means of moving people and things up, and sideways over short distances with higher reliability than any similar enterprise in the world.

Objectives
Convert vision & Mission into specific targets- results and outcomes the org. wants to achieve. Financial objective: To increase market value added (MVA) by 25% in next 5 years. MVA = current stock price x no. of stocks stockholders equity investment

Strategic Objectives
To safely deliver a hot, quality pizza in 30 minutes or less at a fair price and a reasonable profit
Objectives at each level of organization and for every one in the organization.

Strategy
Means to achieve objectives. Penetrate market by franchise within and outside USA

Basic questions to answer for formulating strategy What business are we in? What are our internal strengths and weaknesses ? What external opportunities and threats do we face? What business (es) should we be in? How do we get there? How do we know we are still on the right track? Results are the pay off.

What business are we in?

Who is our customer and how can we provide value to him/her? One/two, Few, many? What product or service do we market? Single product, multiple products?

What are our internal strengths and weaknesses ?

Be aware of your cos core capabilities and sources of competitive advantages. core capabilities: The critical skills and processes that an organization executes so well in carrying out its intended strategy that its reputation builds around them. Consistency in action is the key. Marriot has 66 point guide in making up rooms that the employee consistently follow.

SWOT
Analyse internal environment and find out Strengths and Weaknesses Find out distinctive competence. Analyze external environment & Industry analysis find out Opportunities and Threats

Compare SW with OT & find out the niche where orgn. has competitive advantage.

Strength
- Skills and capabilities that enable orgn. to conceive of and implement strategies. - Resources the organization has, what it does or can do very well. Surplus capital, Reputation Highly skilled manpower Sound management system Rapid production and delivery

Common strengths and Distinctive Competencies

Common strength: A skill or capability held by numerous other competing firms Distinctive Competencies: A strength possessed by a few competing firms Unique competence Exceptional strength possessed by a firm

Common strengths and Distinctive Competencies Strategic imitation- the practice of imitating another firms distinctive competence for implementing strategy Competitive advantage a distinctive competence that enables a firm to attain above normal economic performance. Teamwork Sustained Competitive advantage A competitive advantage exist after all attempts of strategic imitation have ceased. Coke

Weakness
- Skills or competence required but not possessed by the firm to choose or implement the strategy - Limitations, shortage of resources/ - What the organization is not good at Shortage of skilled manpower Poor R & D Weak marketing capability Lack of reputation

competitive advantage
competitive advantage occurs when a business is able to sustain an edge over its rivals by attracting customers and defending itself against competitive forces.

Competitive Disadvantage.
Invest to eliminate weakness and acquire the strength Revise the mission Firms that fail to recognize or remove weakness are likely to suffer from competitive disadvantage. A firm have competitive disadvantage when it cannot adopt or implement the required strategy being implemented by competing companies.

Opportunity
- An area in the environment that , if exploited, may generate higher performance - Scope of expanding existing business or new business successfully Mobile phone set, connection, servicing 3D cinema

Threats
- An area in the environment that increases the difficulty of doing business which affect high performance _ Any event that may curtail sales or business New law imposing environment/health compliance shooting up cost or suspension of production Technological obsolescence land phone

Porters Five Forces model of competitive Env.

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 When all 5 forces are high, an industry has relatively few opportunities and numerous threats. Firms in this type of industry has potential to achieve only normal economic performance

Business Level Strategies

-Strategies that a firm chooses to conduct its business in a particular industry or market. 3 classes : 1. Porters generic strategies 2. Miles & Snow typology 3. Product life cycle based

Porters generic strategies

Cost leadership : A competitive advantage based on low cost >>>lower price - be the lowest cost producer. Differentiation: the ability to provide unique and superior value to the buyer in terms of quality, special features or after sale service

Focus
Cost Focus- identify a niche market & follow cost leadership Differentiation focus: identify a niche market & follow differentiation

Miles & Snow Typology

Prospector- innovative and growth oriented. Searches for new market and new growth opportunities. Encourages risk taking. 3M Defenders Protects current markets, maintains stable growth, serves current customers. BIC

 Analyzer Maintains current market and current customers satisfaction with moderate emphasis on innovation: Yahoo Reactor no clear strategy, reacts to changes in env. , drifts with events. IH

Product Life cycle: How sales volume

of a product changes over the life span of the products

Stages: Introduction: demand is high. StrategyFocus on how to produce and deliver more. Growth more firms produce but sales continue to grow. Strategy - Differentiate to promote

The Product Life Cycle

Introduction

Growth* Time

Maturity

Decline

*The right end of the Growth stage is often called Competitive Turbulence because of price and distribution competition that shakes out the weaker competitors. For further information, see C. R. Wasson, Dynamic Competitive Strategy and Product Life Cycles, 3rd ed. (Austin, Tex.: Austin Press, 1978).

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 Maturity: overall demand growth slow down. Some firms may quit. Strategy: Differentiate & lower cost. Search for new product. Decline : demand decreases, firms decreases , yet sales drop. Strategy : Anticipate decline and go out . Try new product.

Corporate level strategies

Strategies for operating simultaneously across several industries and several markets. Corporate strategies refer to decisions about which businesses, industries, and markets an organization will enter , and how to manage these different business. Many organizations have more than one business and each business with an entity, objectives and strategies is called strategic business unit or SBU.

What business should we be in? Grand Strategies

Stability : Stay where you are Growth : Expand, Diversify Downsizing: Reduce the size of enterprise Combination: Incorporate more than one from above strategies

Single product strategy

Manufactures and sells just one product or service. Slide-rule manufacturer. Related diversification: several businesses but some how are related. Basis of relatedness: Similar technology Philips Common channel/marketing skills- P&G Common brand name Disney Common customers - IBM

 Advantages Reduce risk not all eggs are in same basket Reduce overhead cost Exploit its strength in different businesses

Unrelated diversification
Multiple businesses that are not logically associated. Ways new product dev., replacement od suppliers and customers, Mergers and acquisition Advantages : Stable performance over time Allocate capital to maximize performance Disadvantage lack of synergy, understanding diverse business is a problem

Managing Diversification: BCG

Matrix
high ^ m k T

QUESTION MARK STARS

gr ow th
Low

DOGS
CASH COW high
<<<relative >>>> <<<mkt share>>> low

GEC Business Screen

I n d A t r r High
Med Low

Winner
Winner Profit Producer

Winner
Average Business Loser

Question Mark
Loser Loser

Good

Medium

Poor

Competitive Position

Competitive Position
1. 2. 3. 4. 5. 6. Market share Technological Know-how Product quality Service network Price competitiveness Operating cost

Industry attractiveness
Market growth Market size Capital requirement Competitive intensity

Intl. & Global strategies

Why go Intl. & Global ? Global efficiencies- cheaper labour, low distrbn. Cost Multi-market flexibility breast in USA, thai in Russia Worldwide learning learn from different culture & context. McDonald in office building

Strategies
Home replication use the core competence of home operation in global Multi-domestic independent operating subsidiaries each focusing on its market in that country Global-views the world as single market place, standardized goods and services Transnational global scale efficiencies and local advantage. Glocal.