THE STRATEGIC

MANAGEMENT PROCESS
[or How to Analyze a
Case]
Dr. Laura Whitcomb
Mgmt 497

Strategic Management
Definition
= The process whereby managers establish an
organizations long-term direction. This involves:
1) Setting Mission & Goals
2) Strategy Formation
--internal capabilities
--external environment
--selection of strategy
3) Strategy Implementation
4) Strategy Evaluation

How to Analyze a Case

Mission/Vision & Objectives

Current Strategy
Industry Analysis
S.W.O.T. Analysis
Recommendations

MISSION Defined
Answers the question What business are
we in? or Why do we exist?
--Customer Needs: What is being satisfied?
--Customer Groups: Who is being
satisfied?
--Distinctive Competencies: How are
customer needs being satisfied?

Pepsico vs. Coke?

To be the world's
premier consumer
products company
focused on convenient
foods and beverages.

To Refresh the
World...in body, mind,
and spirit.
To Inspire Moments
of Optimism...
through our brands
and our actions.
To Create Value and
Make a Difference...
everywhere we
engage.

Vision Statements
Future-oriented; transformative
Mission = what is; vision = what will be
Companies may have mission or vision or
both
Mission and/or vision often accompanied
by statement of company values

GOALS
= a desired future state that a
company attempts to realize.
Should be:
- precise & measurable
- addressing important issues
- challenging but realistic
- set for a specific time period
- consistent with each other

Weighting Factors: What to Avoid

Types of Goals

Financial

Customer

Product/service attributes; relationship; image

Internal Process

Profitability
Revenue growth
Long-term shareholder value

Operations, customers, innovation

Corporate social responsibility

Learning & growth

Human, information, & organization resources

Levels of Strategy &

Organization Structure
Corporate Strategy
------>Corporate Head Office

Business Strategy
------>Business Divisions

Functional Strategy
------>R&D, HR, Finance, Operations,
Marketing/Sales

Corporate Strategy
Generic Alternatives/Grand Strategies

Stability
Expansion
Retrenchment
Combination

Expansion/Retrenchment
Generic Choices
How?
Internal
External
Alliances

What?
Vertical integration
Horizontal integration
Diversification: related/unrelated

Nestles Corporate Strategy

2001 Acquired Purina pet food
2002/5 Acquired Dreyers Ice Cream
2006 Acquired Novartis nutrition business & Jenny Craig
diet products
2007 Acquired Gerber baby foods

Porters Generic
Competitive Strategies
Purpose: achieve above-average longrun ROI for your industry.
Competitive Advantage

Cost Leadership
Differentiation

Competitive Scope

Broad Target
Narrow Target (Focus/Niche)

Porters Generic
Competitive Strategies
Competitive
Advantage/
Scope

Lower Cost

Differentiation

Broad Target

Cost
Leadership

Differentiation

Narrow Target

Cost Focus

Focused
Differentiation

Tesla Motors http://www.teslamotors.com/

Tesla Motors Strategy

Auto co. based in Palo Alto

Began producing $100,000 electric sports car

in 2008
Tesla engineers focused on the battery,
computer software, & proprietary motor;
outsourced the rest

Runs on lithium ion batteries, used in laptops, vs. nickel metal

hydride
0-60 in 3.7 seconds; 245 mi./charge

Went public in 2010

Tesla 2015
--Over 2,350 Roadsters on the road: no
longer sold in North America
--Model S sedan ($70,000) began deliveries
in June 2012; Model X SUV in 2015
- production in Fremont, CA
-Tesla-Panasonic battery Gigafactory in
Nevada

Corporate Culture
= Collection of beliefs, expectations,
and values learned and shared by
members and transmitted from one
generation of employees to another.
= Collective mental programming.

Functions of Corporate Culture

Conveys a sense of identity

Generates employee commitment
Adds to organizational stability
Serves as a frame of reference

Industry Analysis:
Porters 5 Competitive Forces
Purpose: understand why some industries

have higher profit margins & what factors

can change long-run industry profitability.

Risk

of New Entry
Rivalry Among Established Firms
Bargaining Power of Buyers
Bargaining Power of Suppliers
Threat of Substitute Products

ENTRY
Barriers
Brand

Loyalty
Absolute Cost Advantages

patents
access to raw materials
superior production techniques

Economies

of Scale
Government Regulation

Factors Affecting Intensity of

RIVALRY
Competitive

number of firms
relative market share

Demand

Structure

conditions

growth
decline

Exit

barriers

Factors Affecting
BARGAINING POWER
Number

of firms in buyer vs. supplier

industries
Quantity or % of total orders
Switching costs
Standardization vs. specialization of
input
Threat of vertical integration

The Plastic Bag Paradox

WSJ 9/6/13

Low
Cost
Shale
Gas

Polyethylene
makers:
Exxon,
Dow
Chemical

Plastic
bag
makers

SUBSTITUTES
= products from OTHER industries that
serve consumers needs in a way that is
similar to those being served by your
industry.
Example: coffee vs. tea vs. soft drinks
NOTE: Substitutes are very difficult to
monitor, because they can involve
technological changes in industries that
did not pose any threat in the past.

Threat of Substitutes

Company Situation Analysis

INTERNAL: Strengths & Weaknesses

financial position: relative & changes over

time
functional capabilities: sustainable?
distinctive?

EXTERNAL: Opportunities & Threats

demographic & socio-cultural changes

economic & political/legal changes
industry & technological changes

RECOMMENDATIONS
Shift from Analysis--->Synthesis
Is a fundamental shift in strategy
required or not?
How do your recommendations line
up with your SWOT analysis?
Is this a feasible, creative solution
that is supported by your analysis?